This article first appeared in The Edge Financial Daily, on May 11, 2016.

KUALA LUMPUR: Sugar refiner MSM Malaysia Holdings Bhd is confident of an improved financial performance this year through better management of raw sugar costs and foreign exchange risks.

“We are managing the raw sugar costs by having Dubai operations,” said MSM chief financial officer Aznur Kama Azmir, referring to the company’s newly launched trade office in the Arab city to handle sugar exports to the Middle East and North Africa.

“We are managing the forex, which is ringgit. We’ve covered for the second quarter, we are looking to cover the third and fourth quarter, looking at where the direction of ringgit is going by hedging,” she added at a press conference after MSM’s annual general meeting.

Aznur said based on the company’s in-house study, the price of raw sugar price is on an upward trend due to the situation in Brazil and other producing countries.

“Based on our assessment, Brazil and Thailand will have a deficit. This will pressure the sugar price. We are monitoring it closely,” she added.

MSM reported a higher net profit of RM280.76 million for the year ended Dec 31, 2015 (FY15) compared with RM257.01 million for FY14. Revenue rose to RM2.31 billion from RM2.28 billion.

MSM, the country’s largest sugar producer, has also achieved its highest ever output of 1.03 million tonnes in FY15.

Deputy chief executive officer Mohamad Amri Sahari said the group expects to do even better in FY16 despite the death of MSM chief executive officer Datuk Dr Sheikh Awab Sheikh Abod in April.

Mohamad Amri said the Dubai trading office was expected to start contributing to the group in the first quarter of FY16.

The Dubai office will be further complemented with a representative office in Jakarta, aimed at supporting clients on inbound and outbound transactions across the region and act as a gateway to other markets in the Asia Pacific.

Mohamad Amri said the group would be able to save costs amounting to RM10.5 million in FY16, compared with RM17 million in FY15.

“We had more fuel savings last year because we are using gas. But since January, the gas price has increased 15%, so there is not much to save from there. We are optimistic of saving RM10.5 million this year from other initiatives,” he said.

Mohamad Amri said MSM had also received a number of merger and acquisition (M&A) proposals in milling and upstream in India, but these proposals are still at the preliminary stage of discussion.

Similarly, for its M&A in Indonesia, Mohamad Amri said it is still at the preliminary stage.

Aznur, meanwhile, added that the group would spend RM40 million as capital expenditure on its refineries.

It would use about half of the budget amounting to US$125 million (RM506.25 million) to build its refinery in Johor, which is expected to be completed in the last quarter of FY17.

The Johor refinery, which is expected to reduce the sugar processing costs by 30%-50%, would boost its annual capacity to 2.25 million tonnes by FY18 and expected to double its revenue and profit, said Aznur.

MSM controls up to 65% of the domestic sugar market and aims to increase its market share to 80% with the Johor refinery as a catalyst.