Johor plant drags on MSM’s performance in 1QFY20
KUCHING: The country’s sugarmaker MSM Sugar Holdings Bhd ( MSM) reported another loss-making quarter with RM27.1 million core net loss for its first quarter of financial year 2020 ( 1QFY20), caused by its Johor refinery plant’s higher depreciation and finance cost on top of higher overall expenses due to a low plant utilisation rate of about 34 per cent.
Revenue ticked up 5.2 per cent year on year (y-o-y) to RM510.8 million on the back of higher contribution from industry and export segments but partially offset by lower wholesale volume.
Affin Hwang Investment Bank Bhd ( AffinHwang Capital) saw that in particular, higher industry segment volume was achieved likely due to better pricing and perceived quality of MSM sugar from industry clients whereas export volume was higher on contribution from its new valueadded products such as premix, liquid sugar and fine syrup.
“All in, we deem the result to be broadly within our full-year core net loss expectation of RM95.2 million but below consensus’ loss of RM54 million,” it highlighted.
“Going forward, we note that the group intends to raise production in MSM Johor towards a breakeven utilisation rate of 48 per cent, in part through the launch of healthy sugar variants in June 2020 as well as penetrating new export markets for its liquid and premix sugar.”
MIDF Amanah Investment Bank Bhd (MIDF Research) believed that the closure of MSM Perlis and relocation of factory operations to MSM Johor could lead to an improvement in refining cost and thus generate higher profit margins for the group.
“Coupled with increasing export queries for its sugar products, we are of the view that the Johor’s plant utilisation rate to improve to 40 to 50 per cent in FY20. Note that the current utilisation rate of MSM Johor is 34 per cent and it has a breakeven point at about 48 per cent.
“Based on our channel checks, the group plans to utilise MSM Johor to cater for the potential sales up to about 300,000 metric tonnes (MT) for the export segment.”
Categorised as an essential service under the movement control order, MSM’s factory operations continue to run at full production manpower, facing no disruption to its supply chain.