Friday 29 Mar 2024
By
main news image

KUALA LUMPUR (Aug 21): Refined sugar producer MSM Malaysia Holdings Bhd incurred a net loss of RM67.33 million in its second quarter ended June 30, 2019 (2QFY19) — its third consecutive quarter in the red — as the group was dragged by lower average selling price (ASP) of refined sugar and higher refining costs.

The 51%-owned unit of FGV Holdings Bhd also incurred higher finance cost during the quarter following the modification of certain terms in respect of an Islamic term loan, its stock exchange filing today showed.

In comparison, the group made a net profit of RM14.33 million in the year-ago quarter of 2QFY18, when revenue came in at RM573.03 million. In its latest quarter, revenue fell 17.3% to RM474.02 million.

The weak quarterly earnings pulled the group into the red in the first half of FY19 (1HFY19) with a net loss of RM74.34 million, compared to a net profit of RM30.14 million it posted in the previous corresponding period, as revenue dropped 14.5% to RM959.46 million from RM1.12 billion.

In a separate statement, MSM said the 1HFY19 losses were incurred largely due to the reduction in the ASP of refined sugar, a weaker ringgit that resulted in pricier raw materials, and stiff competition in the market as well as costs associated with MSM’s refinery in Johor.

"During 1H19, MSM recorded a decrease in the ASP for domestic and industry sectors of 9% and 13%, respectively, due largely to a glut in the supply of sugar. This is mainly attributable to the issuance of new Approved Permits (AP) in the industrial sector, which resulted in price competition. Meanwhile, the heightened competition in the export market has resulted in reductions in overall ASP and sales volume of 3% and 21%, respectively," it said.

The weaker 1HFY19 earnings was also impacted by higher finance cost and commercialisation cost of MSM Johor that includes depreciation.

"Barring these two major costs, MSM recorded earnings before interest, tax, depreciation and amortisation (EBITDA) for the period of RM27.5 million. The increase in raw sugar cost for 1HFY19 as a result of the weakening of the ringgit to 4.1269 against the greenback compared with 3.9614 in the previous year, further impacted performance," it added.

MSM had expected 2019 to be a challenging year due to the glut of refined sugar in the domestic market, and the weakening ringgit, said MSM group chief executive officer Datuk Khairil Anuar Aziz.

Moving forward, he said that MSM will remain cautious for 2HFY19, despite expectations that the ringgit will be stronger over the next few months. "MSM expects to capitalise on the anticipated lower average cost per tonne of raw sugar, as the slide in the benchmark NY#11 and relatively favourable ringgit are in our favour,” he added.

Having said that, he said the imposition of the sugar tax for sugared beverages, the possible issuance of even more APs and the potential liberalisation of the local sugar market may hurt its bottom-line. "Thus, MSM is engaging with relevant authorities and customers to discuss further, industry-related matters, especially the issuance of APs," he said.
 
Meanwhile, the group will continue to monitor and practise strategic hedging to mitigate its exposure to global raw sugar prices and currency volatility.

"In line with our continued commitment to ease cash flow, MSM’s primary focus areas for 2019 include the possible disposal of non-core assets, reducing stock levels and improving efficiency to lower refining cost. We are also looking to diversify into value-added sugar products for exports and aim to accelerate strategic growth through possible commercial collaborations with reputable industry players to pave the way for global market presence," Khairil Anuar added.

      Print
      Text Size
      Share