kuala lumpur: MSM Malaysia Holdings Bhd, producer of the local refined sugar brand Ghra plai, will continue with its hedging strategy to manage cost fluctuations and volatile market conditions until the government decides on a new pricing mechanism.
Chief executive officer Syed Faisal Syed Mohammad said MSM was running its operations through forward purchases, market average hedging and taking advantage of incentives offered by the government to the sugar industry.
“The sugar price cap doesn’t make sense anymore. We have to manage, whether in the wholesale sector or in the industry sector, in the sense that we have to buy forwards quite frequently, and at best we are hedging the market average,” he told a news conference after the company’s annual general meeting today.
Meanwhile, on the non-consumer side, the industry is operating in a “back-to-back” manner, passing on costs to the industry, he said. “Similarly for exports, we account for around 20-25 percent of the exports. So exports are also a kind of cost pass-on, pass-on to customers,” he added.
Syed Faisal pointed to the challenge posed by the cost of raw sugar, which constitutes a major part of MSM’s input costs, which has almost doubled between 2021 and 2023.
“The cost of raw sugar itself is our major input cost. So raw sugar can be tracked to the New York 11 contract in the ice market and it accounts for about 75% to 80% of our input costs. It was high last year and it’s high in 2022. Simply put, it’s almost doubled from 2021 to 2022 to 2023,” he said.
The current retail price of sugar is RM2.85 per kg. Syed Faisal said the selling price could increase from RM0.80 to RM1.50 per kg if the government approves the recommended price fluctuation mechanism.
“The price of RM2.85 on retail shelves is unusual in that it is the cheapest retail price in the region and possibly the world,” he said.
MSM said the sugar industry continues to face rising input costs for raw sugar and freight rates remain volatile, further exacerbated by the Red Sea crisis since the first quarter of this year.
Natural gas prices have also remained high, and raw sugar imports have been affected by the strong US dollar and ringgit.
Going forward, MSM aims to explore upstream integration with plans to ensure a sustainable supply of raw sugar to meet its long-term business needs.
MSM said it is also focusing on downstream value-added products such as liquid sugar and premixes, aiming to capitalise on market demand and strengthen its revenue streams.
In 2023, MSM exported to the top five markets: Philippines, China, Singapore, Indonesia and Vietnam. Apart from these, MSM maintained export relationships with markets such as South Korea, Hong Kong, New Zealand, Taiwan and Pakistan.
The refined sugar producer is looking to expand its market beyond Asia Pacific and South Asia into Africa in line with its vision of further penetrating and diversifying into global markets.
