KUALA LUMPUR (June 17): MSM Malaysia Holdings Bhd is upbeat on its profitability path this year, despite expecting to miss its full-year production target of 1.3 million tonnes by a small margin.
MSM group chief executive officer Syed Feizal Syed Mohammad said the group expects demand to be stable despite the re-implementation of the Full Movement Control Order (MCO 3.0).
“We may fall slightly short, but not significantly,” Syed Feizal said. “Our export target is 350,000 tonnes this year, of which we have secured 65% [of the off-take by customers],” he told a virtual press conference today.
“We believe sugar demand will remain stable with MCO 3.0. [Demand] can only start to go up with the concurrent vaccination programme,” Syed Feizal said. “We are optimistic moving forward.”
“Within the gazetted ceiling price from refiners to wholesalers, we have improved in terms of our average selling prices,” Syed Feizal said, adding the hike does not affect off-the-shelf prices, which are also controlled by the government.
MSM posted two consecutive quarters of profit recently, after two years in the red, as it recorded higher utilisation of its refineries in Johor. Some 30% of MSM’s revenue comes from the exports market.
Utilisation rate is expected to be at 50% for its 1 million tonne per annum (tpa) Johor plant in 2H2021, from around 22% in 1Q2021, and to be at 75% for its other plant in Prai, Penang, which produces 860,000 tpa.
The two plants were temporarily shut this year — the one in Johor for two months due to a boiler breakdown, and the Penang one for two weeks due to the Covid-19 outbreak.
A 50% utilisation rate of its Johor assets may reduce its refining costs by about 40%, the company said.
Meanwhile, efforts are ongoing to reduce its finance costs. The group has hedged 92% of its raw sugar input covering the wholesale segment — which makes up around 85% of refining costs.
“This year, we are paring down a bigger portion of our debt, at close to RM100 million,” Syed Feizal said, which will come from the disposal of assets as well as rationalisation of a portion of its RM100 million capex for its Johor ramp-up.
The group booked finance costs of RM35.77 million last year, down from RM82.13 million in FY19. Short- and long-term borrowings stood at RM387.46 million and RM507.35 million respectively, with cash at RM92.64 million at end-March.
MSM shares closed three sen or 2.33% lower at RM1.26 today, valuing the group at RM885.75 million.