CSR does not rule out IPO as early as next year

The company’s expansion plans include becoming a FMCG player in order to have a bigger role in the supply chain


CENTRAL Sugars Refinery Sdn Bhd (CSR) is working towards a possible listing on Bursa Malaysia as early as next year, in line with the sugar refiner’s effort to ramp up expansion plans to meet its target of being a full-fledged fast-moving consumer goods (FMCG) company.

Its MD and CEO Hishammudin Hasan (picture) said while the group is currently “quite comfortable” in terms of cash, it is not ruling out the possibility of raising additional funds further down the line.

“We’re open to the idea and we’re looking at the situation with interest. We’ll make a decision when the time is right,” Hishammudin told The Malaysian Reserve in a recent interview.

“At the moment, we’re not rich, but we’re quite comfortable because we invest prudently,” he added, noting the group’s priority is on the quality of its products rather than increasing production capacity.

The domestic refined sugar market is dominated by CSR and MSM Malaysia Holdings Bhd, with CSR controlling about a 40% market share, while the remainder falls under MSM.

The company operates two refine-ries — CSR in Shah Alam, which has a maximum annual production capacity of 600,000 tonnes per annum and Gula Padang Terap Sdn Bhd (GPT) in Kedah, with a maximum annual production capacity of 200,000 tonnes annually.

GPT, which previously operated as a subsidiary of Tradewinds (M) Bhd, became a wholly owned unit of CSR two months ago, according to Hishammudin. Tradewinds is the parent of CSR.

The exercise has pushed the group’s total maximum annual production capacity to 800,000 tonnes. MSM’s total production capacity stands at up to 2.25 million tonnes per annum, according to MSM’s website.

CSR’s core business is in refining raw sugar which is then sold to the food and beverage (F&B) industry, as well as directly to consumers.

However, the group’s long-term goal is to become a FMCG player, in order to have a bigger role in the supply chain, as well as better margins.

“If you remain a commodity player, you’re always going to be part of the chain, but unable to make a difference.

“Also, as a commodity player, your margins are always squeezed. In the whole ecosystem, you’re always going to be at the short end of the stick,” Hishammudin said.

A five-year horizon has been set for the group to achieve its FMCG goal, which it expects to reach by revam-ping the organisation and creating diversified products that meet consumers’ needs.

One such product is CSR’s Better Brown Low GI, a brown sugar with a low glycemic index (GI) value introduced in November last year.

The group is banking on the product to carry it through the wave of anti-sugar sentiment that has risen amid growing consciousness towards health issues often linked to excessive sugar intake.

Some RM20 million has been allocated to retrofit the group’s sugar refining plant in Kedah, with the aim of turning the refinery into a regional base for production of its low GI brown sugar.

A further RM30 million is also being pumped into efficiency and productivity improvements at CSR’s Shah Alam refinery.

While the funds are internally generated, the group is also in talks with the government for incentives such as tax exemptions on equipment at its Kedah refinery, Hishammudin said.

“We’re investing in Kedah because it’s non-existent today in producing this kind of high value sugar. (So) we’re going to engage the government and say, look, we’re investing for Kedah and it will provide employment and a whole ecosystem, so is there a possibility we can get some help?” he said.

The Kedah plant currently has the capacity to produce about 10,000 tonnes of white sugar per month.

Following the estimated completion of the retrofitting works by the fourth quarter of this year, the plant will be able to produce about 15,000 tonnes of white sugar per month and 9,000 tonnes of Better Brown sugar monthly.

“We’re investing to produce that kind of sugar (Better Brown). It’s very prudently managed and tested, but (with the) more aggressive plans we have, we won’t rule out going to the money market,” Hishammudin said.

Pushed to reveal if that could lead to an initial public offering (IPO) happening next year, Hishammudin replied: “Possibly. I wouldn’t rule that out.”

Tapping the capital market appears to be an attractive option, given that CSR isn’t just upgrading its existing plants — it’s also considering acquiring downstream FMCG players in the future.

Hishammudin said any acquisition is likely to happen at least two years from now as the group’s immediate focus is on introducing more products and preparing to become a full-fledged FMCG player.

CSR is no stranger to the equities market. Established in 1965 as United Malay State Sugar Industries, the group was acquired in 1968 by Malayan United Industries Bhd and renamed as Central Sugars Bhd (CSB).

CSB was listed on the Kuala Lumpur Stock Exchange, before its delisting in 1983 by Perbadanan Nasional Bhd in a corporate manoeuvre. Post-delisting, CSR was incorporated to take over CSB’s assets.

Presently, CSR has an authorised capital of RM50 million and a paid-up capital of RM33 million, as per its official website.

The company’s main competitor, MSM, was listed on the Main Market of Bursa Malaysia in June 2011.


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