FGV Annual Report 2015

57 WHO WE ARE & WHAT WE DO OUR STRATEGIC INTENT & PERFORMANCE HOWWE ARE GOVERNED CREATING SUSTAINABLE VALUE OUR NUMBERS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING ADDRESSING OUR RISKS & OPPORTUNITIES Felda Global Ventures Holdings Berhad Annual Integrated Report 2015 Business Operations Review Sugar The Sugar Cluster operates via the Group’s wholly owned company, FGV Sugar Sdn Bhd and its 51% shareholding in Bursa Malaysia-listed subsidiary company, MSM Malaysia Holdings Bhd (MSM). The Sugar Cluster’s refining capacity is 1.25 million MT per annum and in 2015, it produced 1.03 million MT of refined sugar, maintaining its foothold at 65% of the domestic market share. The uplifting of sugar subsidies in 2013, increased the sugar industry competition, but did little to stir demand brought on by population growth and rising incomes. Like other commodities, the raw sugar prices were highly volatile in 2015. Current market sentiment points to a potential supply shortage, which could drive prices higher. The surplus sugar from Thailand market was largely taken up by Indonesia at the end of 2015. By then, global raw sugar supplies fell to around 1 million MT. There was a consequent rise in speculative buying which drove up the price of raw sugar throughout the year. Moving forward, unfavourable weather condition and El Nino in Brazil is expected to have a significant impact on crops, thus putting added pressure on the shortage situation. Experts are forecasting global supply to turn deficit in 2016, spelling an upside for the outlook on raw sugar prices. Weak Ringgit Takes its Toll In 2015, both revenue and profit before tax for the Sugar Cluster increased marginally. Revenue increased to RM2.31 billion, compared to RM2.28 billion in 2014. Profit before tax experienced a similar increase to RM400 million from RM373 million the year before. Aside from the volatility of sugar prices, earnings were largely impacted by the performance of the Ringgit. The local currency depreciated by some 18% against the US dollar over the year. The Cluster also faced stiff competition from the market due to increased numbers of import Approved Permits. Thus resulted in decreased sales volume for imported refined sugar. Perlis MSM Perlis Sdn Bhd (10776-K) - Factory - Plantation Penang MSM Prai Bhd (3573-D) - Factory Selangor MSM Prai Bhd (3573-D) - Warehouse Johor MSM Prai Bhd (3573-D) - Warehouse Kuala Lumpur MSM Malaysia Holdings Bhd (935722-K) - Head Office MSM Prai Bhd (10776-K) - Head Office MSM Logistics Sdn Bhd (208409-P) - Head Office Our Presence in Malaysia via MSM Malaysia Holdings Bhd Perlis Kedah Penang Kelantan Perak Terengganu Pahang Negeri Sembilan Malacca Selangor Johor