Value Creation Is The Bedrock Of Our Business 64 FGV HOLDINGS BERHAD Group Business Review SUGAR FGV’s Sugar Sector operates mainly through its 51% owned subsidiary, MSM Malaysia Holdings Berhad (MSM), the nation’s top sugar producer with one of the largest sugar refineries in the world. It operates two refineries in Penang and Johor with a total refining capacity of 2.05 million MT. As sugar continues to be an essential commodity across economic segments, we continue to strive in increasing market penetration and explore diversification opportunities while improving our operating efficiencies. Our Sugar business faced a highly challenging year in 2022. The world’s benchmark contract for raw sugar, NY11, fluctuated between USD17 cents per pound to USD20 cents per pound1 causing higher average prices in comparison to the previous year, in which raw sugar made up 80% of our production cost. As a result of the inflationary pressures and global headwinds, we have experienced a rise in the overall operational costs which led to margin compression and affected our Sugar Sector’s profits. In mitigating these challenges, we moved to protect our margins, optimise cost and utilisation capacity. MSM revised its industry and export prices while continuing to engage with the Malaysian government to revise the wholesale ceiling price or consider a subsidy in lieu, given that retail prices remained unchanged for the past decade. We took additional steps to manage high operational costs and continued to hedge Brent crude oil in mitigating the rising gas prices. FINANCIAL PERFORMANCE RM2,566 million REVENUE 2021: RM2,260 million (RM177 million) P/(L)BT 2021: RM86 million The Sector recorded total revenue of RM2.57 billion in 2022, a 14% increase from RM2.26 billion last year. This growth in revenue was primarily driven by the higher average selling price of refined sugar across the wholesale, industry and export segments. Additionally, the Sector experienced an increase in sales volume in line with market demand. Despite these positive developments, the Sector recorded a Loss Before Tax (LBT) of RM177 million in 2022, in contrast with a PBT of RM86 million in 2021. This unfavourable outcome was mainly attributable to increased production costs resulting from rising raw sugar costs driven by higher NY11 and freight, higher fuel costs, and the weakening of the Malaysian Ringgit. MSM Malaysia Holdings Berhad is the leading sugar refiner in Malaysia. 1 https://www.nasdaq.com/market-activity/commodities/yo:nmx
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