MSM Malaysia Holdings Berhad Annual Report 2020

Liabilities: Payables increased by 20.87% compared to 2019 because of the Just-In-Time arrangement with suppliers. Capital Resources: MSM’s gearing ratio stood lower at 33% in 2020 compared to 36% the previous year. The lower gearing was primarily due to overall repayment of bank borrowings and higher cash balances within the year. FORTIFYING FINANCIAL SUSTAINABILITY Raw sugar procurement through the Just-In-Time method was set towards improving the Group’s cash position through savings from minimal paid raw sugar stockholding, lowering interest cost and reducing external warehouse rental expenses. Agility in ensuring that the production volume from MSM Perlis was swiftly and successfully consolidated to MSM Johor and MSM Prai, when MSM Perlis refinery operations was discontinued on 30 June 2020, brought about improvements in refining cost. Group wide, MSM’s yield has improved to 94.62% in 2020 compared to 94.39% in 2019 primarily as a result of yield improvements in MSM Johor. Another breakthrough towards future sustainability is in the expansion of the Group’s business into the export of value-added products. The growth of value-added sugar sales improves the overall profitability and utilisation factor of the refineries. In 2020, capacity expansion for fine syrup was completed and MSM escalated its export of premix, liquid sugar and fine syrup to China. Capacity expansion of liquid sugar and premix facilities in MSM Johor is set to be fully completed in 2021 to cater for the increasing demand from China and other Asian markets. 2021 FINANCIAL PRIORITIES Management’s main focus for the year towards enhancing financial resilience will be to: a) Optimise production levels and reduce refining cost Initiatives towards this end entails a continued focus on improving the overall yield in all our refineries supported by additional capital investment. We aim to improve MSM Johor’s production capabilities and efficiency with introduction of new stockholding units (SKUs) to meet domestic demand especially for coarse grain sugar. Concurrently, we target to penetrate new markets via direct engagements with reputable players abroad having regional distribution networks, towards increasing sales and utilisation factor of our refineries. b) Increase sales of value-added sugar products Work to complete expansion plans for the value-added facilities in MSM Johor is on-going and steadfast. In addition, the Group commits to further explore downstream into sugar related business to unlock more value-added income streams. c) Improve distribution cost Further cost improvements are being sought by streamlining the logistics and supply chain operations for smooth delivery at lower cost. This is to be achieved via strategic delivery planning taking advantage of the location of MSM Johor and MSM Prai in order to optimise the last mile delivery savings on distance traveled and cost of delivery. d) Capital restructuring and fund raising The Group is looking into strategic capital management and fund-raising programmes to improve liquidity and to meet strategic investment requirements. e) Monetise non-core assets Monetisation of all the non-strategic and non-productive assets will continue to be identified in order to streamline operations and improve overall profitability. MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 35 SUSTAINABILITY REPORT EFFECTIVE LEADERSHIP CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING