MSM MALAYSIA HOLDINGS BERHAD
KLSE (MYR): MSM (5202)
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ITCHYLEG
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Posted by ITCHYLEG > 2020-05-30 20:46 | Report Abuse
It says that the exports of these products, on top of molasses, will continue to be increased moving forward.
As for the domestic market, MSM intends to launch its healthy sugar variants next month and downstream products with the FGV group in June or July this year.
Based on the recently-announced results for its first quarter ended March 31,2020, about RM40mil or 7.8% of MSM’s revenue was contributed by its export sales.
The biggest contributor was the sales to industries, representing RM268mil or almost 53% of total sales.
The sales to the domestic retail segment was RM201mil or about 39.5%.
MSM’s total sales volume in the three-month period increased by 5%, thanks to the newly launched export products in the second-half of 2020, such as premix and liquid sugar. The shipment of fine syrup in February 2020 also contributed to the increased sales volume.
On top of its improved sales, MSM is also exploring ways to preserve its margins.
According to Khairil Anuar, the group has been successful in improving the average selling price for its domestic and export markets.
“Our product development has also been successful and we have been able to launch new sugar products for the export market with better margins.
“We are working constantly and consistently on product diversification and have a few better-margin products targeted to be launched later this year, ” he says.
On the group’s ongoing cost-cutting efforts, Khairil Anuar says many measures have been undertaken.
The biggest and most important measure is the implementation of the ‘Just-In-Time’ mechanism for the procurement of raw sugar, which is aimed at enhancing MSM’s cash flow and reducing storage costs, since unfavourable contracts that had locked in prices at a high level expired in December 2019.
With raw sugar being one of its largest cost components, the new mechanism not only secures the supply of sugar, but also enables MSM to save on interest costs as funding needs are expected to reduce.
It is worth noting that MSM’s rationalisation plan, which began in the second quarter of 2020 following the decision to cease its non-core plantation operations, have begun to bear fruit.
Khairil Anuar says that the decision to consolidate the Perlis refining capacity to the larger plant in Johor has enabled MSM to save RM1.6mil in depreciation costs per month since the third quarter of 2019.
“This year, we will further save RM1.1mil in operational cost per month. This will be achieved as we will be able to increase the utilisation of the Johor plant, which will in turn reduce the refining and operational cost for the group, ” he says.
Khairil Anuar was also asked to comment on the group’s plan to improve its balance sheet. As at end-March, MSM was sitting on a net debt position, with its cash and cash equivalents totalling RM114.82mil against total borrowings of RM923.11mil.
In response to this, Khairil Anuar says that the improvement in MSM’s gearing level should be seen by the third or fourth quarter of this year, down from the current gearing level of 30% to 40%.
“MSM had reduced more than half of its outstanding bridging loan facility in May 2020 and will continue to serve its bridging loan debt commitment until it is fully settled in the early fourth quarter of 2020.
“We also have plans to monetise non-core assets which should further reduce the gearing level. MSM also implemented the ‘Just-in-Time’ mechanism for raw sugar handling, which further reduced our funding needs for raw sugar procurement, ” he says.
For its first quarter (Q1) of FY20, MSM reported that its net loss had widened to RM34.71mil. A year earlier, the group had recorded a net loss of RM7.06mil.
The higher loss was attributable to MSM’s lower gross margin of 3%, higher finance cost and higher depreciation incurred in the quarter compared with the same quarter last year, due to the commercialisation of its Johor plant.
However, MSM’s revenue in Q1 rose 5% year-on-year to RM510.84mil, thanks to the increase in the overall average selling price for the group and new export products in 2020.