MSM Malaysia Holdings Berhad Annual Report 2020

MAINTAINING MARKET LEADERSHIP In 2020, MSM’s production output for the first half of 2020 was hampered by the contraction in local demand due to the Movement Control Order (MCO) imposed as a result of the COVID-19 pandemic. Following the opening up of local economy in June to September 2020, output started to increase in line with sales demands. Factory operation was stretched without shutdown since May 2020 to meet this sudden surge in domestic sales. As a result, MSM closed the year strongly, recording record high production output of 295,646 tonnes in the final quarter, 7% higher than the same quarter in the previous year. Group UF for the final quarter also improved to 57.7%, compared to 49.42% in the last quarter of 2019, with higher yield of 95.43%, compared to 94.63% the previous year. Analysing year-on-year yield, overall Group yield has improved from 94.39% in FY2019 to 94.62%, showing more efficient sugar refining and lower loss. Moving forward within a more competitive landscape, MSM is committed to act proactively in order to maintain market leadership. On the Wholesales front, a consolidation of wholesalers for efficient fulfilment of demand, better focus and improved segmental mix is in the pipeline. This strategic partnership, and possible OEM with major wholesalers will allow MSM to leverage on their strength and logistic assets. In addition, marketing strategies that offer flexible price mechanisms through rebates, bundling and door to door offers will be more intensively explored. For the Industry segment, MSM’s focus is to ensure premium product and service quality, as well as heighten direct engagements with selected small medium industries (SMIs) and global players in fast moving consumer goods (FMCGs). Through this we intend to expand our current SMI market share and increase collaborations to widen our distribution network especially in Singapore and Vietnam. Efforts are also ongoing to improve stockholding units (SKUs) of our popular variants such as coarse grain sugar to ensure reliable delivery. ENSURING CONTINUOUS GROWTH In ensuring continuous growth, new marketing studies revealed the growing trend among select groups of choosing sugar free products that contain less calories. Within the new normal of 2020, when work from home became a common occurrence, there was increasing public awareness on staying fit and healthy by consuming less sugar. In testing out the market, MSM introduced two new product variants to support this lifestyle choice – namely, GoNatura & Go1/2. These are sugar mixes which provide intense sweetness with less use of pure sugar. MSM is hopeful that these new variants will find a niche market among health conscious Malaysians with a sweet tooth. The momentum to step up creation of value added products also continues to build to optimise on MSM Johor’s capacity and capability. MSM has been producing premix, Liquid sugar (LS) and Fine Syrup (FS) for export markets such as Indonesia and Philippines since March 2020. Liquid sugar production capacity is targeted to increase from 3,500 tonnes/month to 20,000 tonnes/month; while the premix product capacity is targeted to grow from 180 tonnes/month to 1,200 tonnes/month. Plans to venture into flavoured syrup are underway and the required installation of machine is in progress. Several variations of flavoured syrup are being studied. Operational focus continues to be directed towards optimising refining cost as per budget, achieving production targets with quality products and on time delivery to end customers. A planned consolidation of group production facilities took off in FY2020 with the cessation of MSM Perlis in June 2020. This was towards optimising on refining cost, with MSM Johor benefitting from the additional uptake of MSM Perlis’s quota. The consolidation benefits should be more evident next year once market demand stabilises to normal rates again. For overall improved performance, efforts were undertaken to identify key optimisation issues for MSM Johor and a few action plans have been established to help ramp up and improve the plant’s UF. A Task Team has been formed for the areas of Ramp Up, Improve Yield and Robust Data recording; and a third party has been engaged for consultation on the refinery’s steam and conveyor system. ACHIEVING OPERATIONAL EXCELLENCE For MSM, operational excellence is defined by both business and sustainability aspects. Given the pandemic, a key priority for business continuity was to ensure the workplace remained free from COVID-19 cases. To this end, the Group swiftly put in place action plans to implement SOPs, weekly disinfections of common areas, sanitisation activities, facial scanner temperature checks of all personnel plus keeping records, providing masks, partitioning dining tables at canteens for social distancing and carrying out COVID-19 desktop drills. MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 39 SUSTAINABILITY REPORT EFFECTIVE LEADERSHIP CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING