MSM eyes more JV, acquisition deals

KUALA LUMPUR: MSM Malaysia Holdings Bhd, which will form a RM800 million joint venture for sugar refinery in Johor, plans to pursue more joint venture or acquisition this year, to be more competitive in the global sugar industry.
"We are looking at one or two joint venture or acquisition this year, we hope Malaysia will become the sugar hub in Asia Pacific in two years," its president cum CEO, Datuk Dr Sheikh Awab Sheikh Abod, told a press conference here yesterday.
However, he declined to elaborate more on the potential joint venture or acquisition plans.
Currently, there are only a few major players in the local sugar industry, with MSM grabbing a 57% market share, while Central Sugars Refinery (CSR) and Gula Padang Terap (GPT), which owned by tycoon Tan Sri Syed Mokhtar Al-Bukhary, make up the remaining market share.
It was reported early last month that Syed Mokhtar may sell its sugar refineries to Felda Global Venture Holdings, which holds 51% in MSM, for a price tag of RM1.2 billion.
If it materialises, sugar will become a monopoly industry in the country.
MSM has entered into a memorandum of understanding (MoU) with the Dubai-based Al-Khaleej International Ltd (AKI) to develop a new refinery facilities in the Port of Tanjung Pelepas, Johor with an expected investment cost of US$250 million to US$270 million (RM811 million to RM876 million).
MSM and AKI will hold 51% and 49% respectively in the joint venture company, which will add two million tonnes to total 3.25 million tonnes of production capacity for MSM per annum once operational.
The sugar refinery is targeted to be ready by 2016 and MSM's portion of up to RM446 million will be internally funded.
Sheikh Awab said the the MoU will be valid for six months but hopes to complete the deal within the next three months.
He said MSM could leverage on AKI's low production cost structure and will be able to compete with sugar players from Thailand as it is expected to achieve 35% to 38% cost reduction.
AKI is owned by Hassa Jamal Majid Al-Ghurair, who is the daughter of the promoter and managing director of Al-Khaleej Sugar (AKS) Jamal Majid Al-Ghurair
AKS is the world's largest standalone sugar refinery, registering an annual production capacity of 2.3 million tonnes with annual revenue of US$1 billion.
MSM owns and operates two sugar refineries while its subsidiaries operate another two refineries which are located in Perlis and Penang.
Sheikh Awab said MSM is looking to export its refined sugar to more new markets, particularly in India and China, which will see a huge sugar consumption of 40 million and 26 million tonnes annually, from 26 million and 15 million tonnes, respectively.
Meanwhile, he opined that for Malaysia to become the Asia Pacific's sugar hub, more efforts needs to be put in place to ensure a complete chain within the industry.
"Not only refinery business, but also upstream segment which will incur huge capital expenditure. (However) If you join hand, you will become stronger," Sheikh Awab said.
Commenting on the subsidy removal on sugar which started last November, he noted that it has some indirect impact on the MSM's financial performance as competition among the industry players intensifies.
"The consumers have (the) option to use ours or Thai sugar, plus (an) influx of foreign sugar (into the market)," he added.