This article first appeared in The Edge Financial Daily on May 24, 2018

KUALA LUMPUR: MSM Malaysia Holdings Bhd, the country’s largest refined sugar producer, posted its third straight quarterly profit in the first quarter ended March 31, 2018 (1QFY18), with a net profit of RM15.81 million compared with a net loss of RM34.62 million a year ago.

In a filing with Bursa Malaysia yesterday, MSM attributed the group’s turnaround to lower raw material costs and favourable foreign exchange rate in the current quarter under review.

Also boosting MSM’s performance is the reduction in administrative expenses, it said.

This resulted in the group recording an earnings per share of 2.25 sen in 1QFY18 compared to a loss per share of 4.93 sen in 1QFY17.

Quarterly revenue, however, fell 14.2% to RM549.06 million in 1QFY18 from RM640.05 million a year ago, due to a 7% reduction in the overall tonnage sold and lower average selling price.

On current year prospects, MSM said the group maintains its positive outlook for 2018 and expects to gain from improved operations, low raw sugar prices and strengthening ringgit in the near term.

MSM executive director Datuk Khairil Anuar Aziz said for the past year, MSM has been marked by prudent cost management initiatives to ease pressure on its margins.

“The cost management initiatives are now sustainably embedded across the group to stabilise the balance sheet. Ideally, we plan to maintain discipline in cost and operational efficiency while focusing investment on our profitable assets to maximise cash flow generation,” he said in a separate statement.

Khairil said industry-wise, sugar yields have improved significantly mainly aided by favourable Asian monsoon rains leading into a global sugar glut. Additionally, global supply is estimated to beat demand by 10.40 million tonnes in the current season, 26% more to erase shortages/deficit of the past two seasons.

“Set to a positive motion in 2018, MSM looks to further improve inventory management, supply and distribution efficiency and operating expenditure optimisation to remain resilient for the remaining quarters in driving business forward. Most importantly, MSM continues to monitor its cash flows and working capital requirements to enable visibility of red flags and proactive actions continue to be exercised to remain financially healthy,” he added.

Meanwhile, MSM said its sugar refinery in Tanjung Langsat, Johor is slated for commissioning in the first half of 2018, in accordance with the timeline. “The capacity growth is focused towards producing better margin and revenue via export sales improvement, particularly in the Southeast Asia and Middle East and North Africa markets,” it noted.