MSM MALAYSIA HOLDINGS BERHAD Q2 2025 Latest Quarterly Report Analysis

Greetings, fellow investors and market watchers! Today, we're diving into the latest financial pulse of MSM Malaysia Holdings Berhad, the powerhouse behind our beloved "Gula Prai" brand. The company has just released its unaudited condensed consolidated financial statements for the second quarter ended 30 June 2025, and there’s plenty to unpack.

While the sugar industry continues to navigate a challenging landscape of high input costs and volatile raw sugar prices, MSM has demonstrated a commendable effort in cost management this quarter. The report reveals a significant reduction in loss before tax compared to the same period last year, a testament to their strategic operational adjustments.

So, let’s cut through the numbers and see what’s truly brewing for this key player in Malaysia’s food sector. This is more than just a financial report; it’s a window into how one of our essential industries is adapting and strategizing for the future.

A Glimpse at the Numbers: 2QFY2025 Performance

MSM’s performance for the quarter ended 30 June 2025 shows a mixed bag of results, highlighting both the persistent market pressures and the company’s internal efforts to mitigate them. Let’s break down the key figures.

Revenue Dynamics

For the second quarter of 2025, MSM recorded a total revenue of RM812,754 thousand. This represents a slight decrease of 2.4% compared to the RM833,077 thousand achieved in the same quarter last year. The decline in revenue was primarily driven by a lower average selling price, particularly in the industrial and export categories, even though the company managed to achieve a higher sales volume.

Looking at the year-to-date performance, the revenue stood at RM1,562,435 thousand for the period ended 30 June 2025, which is 10.2% lower than the RM1,739,691 thousand recorded in the previous corresponding year. This further underscores the impact of the challenging pricing environment throughout the first half of the year.

Interestingly, when comparing the current quarter against the preceding quarter (31 March 2025), revenue actually saw an increase. The current quarter’s RM812,754 thousand is 8.4% higher than the RM749,681 thousand from the previous quarter, largely due to higher sales volume, again despite a lower average selling price.

Profitability Overview

Despite the dip in revenue, MSM showed a notable improvement in its quarterly profitability, primarily driven by effective cost reduction strategies. The company reported a loss before tax (LBT) of RM22,736 thousand for 2QFY2025, which is a significant 28.1% improvement compared to the LBT of RM31,642 thousand in the same quarter last year.

This reduction in loss was largely attributed to a substantial 18% decrease in production costs, driven by lower NY11 (raw sugar futures), freight costs, and favourable foreign exchange movements. This is also reflected in the gross profit, which surged to RM20,915 thousand from just RM2,227 thousand in 2QFY2024, an increase of over 100%.

However, the year-to-date picture reflects a tougher overall environment. MSM recorded a loss after tax (LAT) of RM26,015 thousand for the period ended 30 June 2025, a stark contrast to the profit after tax (PAT) of RM9,316 thousand in the previous corresponding year. This shift from profit to loss was impacted by lower margins and foreign exchange translation losses, despite the aforementioned decrease in production costs.

Comparing to the immediate preceding quarter (31 March 2025), the current quarter’s LAT of RM29,740 thousand reversed from a PAT of RM3,725 thousand. This was primarily due to lower margins from a reduced average selling price, which outweighed the benefits of decreased production costs in the short term.

Operational Efficiency

The company’s capacity utilisation factor (UF) stood at 49% in 2QFY2025, a slight decrease from 50% in 2QFY2024. This reduction was a deliberate production curtailment strategy to manage inventory levels across both refineries, a sensible move given the market conditions. Despite this, consistency in efficiency yield helped maintain operational stability.

Diving Deeper: Financial Health and Cash Flow

Beyond the income statement, it’s crucial to examine MSM’s financial position and cash flow to understand its underlying health.

Statement of Financial Position

As at 30 June 2025, MSM’s total assets amounted to RM2,960,558 thousand, a decrease from RM3,186,514 thousand at 31 December 2024. Similarly, total liabilities saw a reduction to RM1,490,215 thousand from RM1,690,156 thousand over the same period. The equity attributable to owners of the Company also slightly decreased to RM1,470,343 thousand from RM1,496,358 thousand.

Key movements include a decrease in inventories from RM762,768 thousand to RM584,251 thousand, indicating inventory management efforts. Deposits with licensed banks also saw a notable decrease from RM155,379 thousand to RM67,768 thousand. On the liabilities side, current borrowings increased from RM742,057 thousand to RM876,532 thousand, while non-current borrowings decreased from RM151,938 thousand to RM101,856 thousand. This shift suggests a greater reliance on short-term financing.

Cash Flow Performance

The year-to-date cash flow statement presents some notable shifts. Net cash used in operating activities significantly increased to RM(99,748) thousand from RM(31,600) thousand in the prior year, indicating higher cash outflows from core operations. Investing activities also saw a larger cash outflow, primarily due to increased purchases of property, plant, and equipment.

However, there was a positive turnaround in financing activities. Net cash generated from financing activities was RM59,120 thousand, a substantial improvement from the RM(65,250) thousand used in the previous year. This was largely driven by a higher drawdown of borrowings (RM1,282,498 thousand) compared to repayments, which helped to offset the outflows from operating and investing activities.

Overall, cash and cash equivalents at the end of the period stood at RM105,857 thousand, a decrease from RM167,360 thousand in the same period last year.

Borrowings and Covenants

MSM’s total borrowings are denominated in Ringgit Malaysia. While the company maintains secured Islamic term loans, it faces potential challenges in meeting certain financial covenants by year-end. Specifically, the Consolidated Net Debt and Financing to Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) Ratio and the Consolidated Finance Payment Cover Ratio might require attention. Historically, MSM has successfully obtained waivers or letters of indulgence from financial institutions when these situations arise, and they expect to comply with the Finance Payment Cover Ratio this year.

Navigating the Tides: Risks and Future Outlook

The sugar industry, globally and locally, is not for the faint of heart. MSM acknowledges that 2025 will remain a challenging year, primarily driven by sustained high input costs and the volatility of raw sugar prices, which are influenced by fluctuating global production volumes.

Strategic Imperatives

Despite these significant headwinds, MSM is not sitting idle. The company is actively pursuing several strategic initiatives:

• Reinforcing Domestic Footprint: Leveraging the expected peak in domestic sugar demand towards year-end, driven by festive consumption patterns.
• Mitigating Export Challenges: Addressing export pricing pressures while maintaining steady demand.
• Value-Added Products: Exploring and exploiting opportunities in the market for higher-margin, value-added products.
• Operational Efficiency: Continuously streamlining and optimizing operations to ensure profitability amidst the cost pressures.
• Government Engagement: Actively participating in the Joint-Sugar Industry platform to work with the government on finalizing a sustainable pricing framework and implementing import controls on refined sugar. These measures are critical for safeguarding national food security and ensuring the long-term viability of Malaysia’s sugar industry.

Beyond financial performance, MSM continues to uphold its commitment to Environmental, Social, and Governance (ESG) principles. The company is listed on the FTSE4Good Bursa Malaysia Index and FTSE4GOOD Bursa Malaysia Shariah, demonstrating its focus on sustainability. Efforts include advancing a circular economy through waste-to-green (4R) initiatives and actively reducing its carbon footprint, with an ambitious target of achieving carbon neutrality ahead of 2030.

My Take and Your Thoughts

It’s clear that MSM is in a proactive mode, focusing on what they can control – their costs and operational efficiency – while advocating for a more stable regulatory environment. The improvement in the quarterly loss and gross profit is certainly a positive sign that their internal efforts are starting to pay off.

But the road ahead is still bumpy, especially with the persistent global market volatility. The engagement with the government on a sustainable pricing framework and import controls will be a critical determinant for the long-term health of the local sugar industry, and by extension, MSM.

What are your thoughts on MSM’s strategic pivots? Do you believe their focus on cost reduction and government engagement will be enough to steer them towards consistent profitability in the coming quarters? Share your perspectives in the comments below!