Outlook The Group performed well in the financial year ended 31 December 2021, buoyed by good raw sugar hedging. We expect the level of sugar consumption to improve in FY2022 as travel restrictions ease domestically. While raw sugar supply shortages will result in raw sugar price increase, the Group has managed to hedge a significant portion of its Wholesale requirement in FY2022 at below market price. Overall, the Group expects the new financial year to continue to be challenging. There is still significant uncertainty on the full impact of the ongoing COVID-19 pandemic and trade tensions at this juncture. Nevertheless, the Group will remain focused towards higher yield and capacity utilisation which will result in lower refining and production costs and stronger financial position which will put the Group in a good position for growth, should prospects and business sentiment improve. Taxation The Group recorded a higher tax expense of RM43.49 million in FY2021. This is largely consistent with the higher profits recorded. Notably however, the effective tax was higher at 26% against the applicable tax rate of 24% mainly due to the tax effects of non-deductible expenses. This was partly offset by non-taxable gains on disposal of wholly-owned subsidiary MSM Perlis Sdn Bhd. Statement of Financial Position Total debt decreased from RM907.10 million as at 31 December 2020 to RM793.06 million as at 31 December 2021 mainly due to repayment of term loan. Total debt consists of unsecured Bankers’ Acceptance loans and Islamic term loans. Banker’s Acceptance is used for the Group’s raw sugar financing and short term in nature, whilst term loan was drawn mainly for the construction of MSM Johor refinery and is therefore longer term. Gearing ratio decreased from 33% as at 31 December 2020 to 26% as at 31 December 2021 due to lower net debt as at year end coupled with the higher total capital driven by higher profit retained in the Group. Net Debt to EBITDA ratio also declined from 6.54 as at 31 December 2020 to 2.14 as at 31 December 2021. This marked improvement is as a result of additional term loan repayments as well as improved EBITDA from the prior year, as mentioned above. Cash Flow The Group generated a positive operating cash flow of RM95.15 million in FY2021 albeit a decrease from RM277 million in FY2020. The higher revenue and net profit did not translate into an overall increase in working capital due to the tighter working capital management. Despite operating in a challenging environment, the Group ended the year with a healthy cash balance of RM194.78 million which is relatively in line with prior year’s balance of RM195.92 million. Additional information can be found in the Cash Flow Statement on pages 282 to 285. Dividend For FY2021, the Group declared a total dividend of 3.0 sen per share amounting to RM21.09 million which is equivalent to 17% of the FY2021 net profit of RM125.35 million. SUSTAINABILITY JOURNEY HOWWE ARE GOVERNED FINANCIAL STATEMENTS ADDITIONAL INFORMATION 69
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