KUALA LUMPUR, Aug 26, 2015:
Sugar giant MSM Malaysia Holdings Bhd (MSM) will invest US$259 million (RM1.1 billion) for the construction of Malaysia’s largest sugar refinery in Tanjung Langsat, Johor, to cater to the growing consumption in the country.
President and group chief executive officer Datuk Sheikh Awab Sheikh Abod said the country’s annual consumption of 1.4 million tonnes is anticipated to grow to 1.9 million tonnes between 2020 and 2025.
“That means by that time, we will be short of sugar, and when that happens, we have to import sugar. That’s the reason we are building this new refinery in Johor.”
A design, engineering procurement and construction agreement was signed today between MSM and Sharkara International, an affiliate of Thailand’s Sutech Engineering Co Ltd, for a two-year contract worth US$95.7 million.
MSM spent RM90 million cash to acquire 20.48ha plot of land for the country’s third sugar refinery, which is scheduled to be fully operational in the third quarter of 2017.
“Once it is fully operational, it will anchor future markets with a targeted production capacity of two million tonnes of refined sugar per year from 1.1 million tonnes currently.”
This will enable MSM to increase its annual production capacity to 3.25 million tonnes as well as leverage on its strong fundamentals over the years, said Sheikh Awab.
MSM, which is controlled by plantation heavyweight Felda Global Ventures Holdings Bhd, holds a 65% share of the country’s sugar market.
Sheikh Awab said global raw sugar prices are expected to decline further in a couple of months, a welcome development as the bulk of MSM’s imported raw sugar is transacted in US dollars.
On the global front, he said, MSM plans to plough up to US$1.3 million in the upstream business in Indonesia if they win a tender for the mill development project there.
“We are proposing a build-operate-transfer model and we will bring in experts to refurbish the mills, improve the refineries because their yields are getting lower,” said Sheikh Awab.
The final investment amount would depend on the development for a refinery that has a 500,000-tonne capacity, he added.
“I would expect an investment of US$1.3 million. We also need to refurbish the existing mills there, so this would have to be decided later.”
Sheikh Awab also pointed out that besides MSM, four other foreign companies are bidding for the project from state-owned plantation company PT Perkebunan Nusantara.