by LYDIA NATHAN / pic by MUHD AMIN NAHARUL
MSM Malaysia Holdings Bhd aims to increase its export orders to 450,000 next year as the group accelerates production and improves utilisation rate (UF).
Group CEO Syed Feizal Syed Mohammad said the price of raw sugar has been bullish, stemming from unprecedented extreme weather in Brazil that was hit by drought in the earlier part of the year and then frost.
While some volumes would be affected, he said the Brazil market is expected to recover within 12 and 18 months.
He said the export market has been positive and demand is sustained.
“We are in the market of four million tonnes of consumption yearly within the Asia Pacific and MSM has a great vantage point to deliver sugar, besides Thailand.
“We just need to be able to ramp up our capacity fast enough to meet all these demands. We will also be increasing the capacity of products as well,” Syed Feizal said after the groups’ virtual EGM on Wednesday.
To date, he said MSM has a total of 306,000 tonnes of export orders in hand and has delivered 144,000 tonnes.
“We do hope to complete all the orders this year, and in 2022, we are looking to increase its export orders to slightly over 450,000,” he said.
At the EGM, shareholders have approved the disposal of the entire equity interest in MSM Perlis Sdn Bhd (MSM Perlis), a wholly-owned subsidiary of MSM, to FGV Holdings Bhd’s unit, FGV Integrated Farming Holdings Sdn Bhd, for an initial disposal consideration of RM 175 million cash.
The entire plantation sector in MSM Perlis had ceased operation since Sept 15, 2019, due to high operating cost for maintenance that resulted in unsustainable financial commitment.
Meanwhile, its refinery operation was discontinued on June 30, 2020, following the group’s operation rationalisation strategies to consolidate the production capacity to the new refinery MSM Sugar Refinery (Johor) Sdn Bhd (MSM Johor).
MSM said the MSM Perlis disposal comprises 11 parcels of agricultural and industrial land, subject to adjustment for net working capital and net debt at completion of the proposed disposal.
The disposal of the entire equity interest in MSM Perlis is estimated to result in a gain of RM 91.6 million after its completion, according to Syed Feizal.
“The strategy has reflected on our progressive financial performance since the fourth quarter of 2020, partly attributable to the improved operational reliability.
“Strategically, the discontinuation of non-strategic operations consolidated up to 200,000 tonnes of production volume, along with the redeployment of qualified manpower and experts to, MSM Johor and our refinery in Penang, MSM Prai Bhd, to accelerate production momentum and further optimise UF,” he said.
The CEO said MSM Johor is expected to become profitable by 2022, provided the asset hits 50% UF, which should be reached by year-end.
“Anything more than 50% will place Johor in the black,” he said.
At present, MSM Johor’s UF stands at 30% with a production volume of 300,000 tonnes.
Previously, Syed Feizal said the refinery had technical issues that led it into a loss.
“It has been largely rectified now towards optimisation but we acknowledge we could have done better in the building.
“Having said that, Johor is definitely on |the turnaround track and is being managed well right now,” he added.
MSM shares closed 2.94% higher to RM1.75 on Wednesday valuing the country’s leading refined sugar producer RM1.23 billion.