KUALA LUMPUR (June 19): MSM Malaysia Holdings Bhd (KL:MSM) expects the 5% sales and service tax (SST) on raw sugar to pressure input costs, which could in turn push up prices of refined sugar for industrial buyers.
MSM group chief executive officer Syed Feizal Syed Mohammad said although the tax only applies to raw sugar and not refined sugar, it would still indirectly push up the cost of production for local refiners.
“We believe that even if it is still imposed, we can pass it on, of course, to industries which are not under the controlled ceiling price,” Syed Feizal said.
“But what we will not be able to pass on is to the consumer products which are on the retail shelf [refined sugar],” he said at a press conference after the group's annual general meeting (AGM) on Thursday.
MSM, one of only two sugar refiners in the country, is currently seeking clarification from the government regarding the tax imposed on raw sugar effective July 1.
“Clarity is required and we are engaging the government accordingly,” he said.
Retail sugar prices in Malaysia have been capped at RM2.85 per kilogramme since 2011, despite rising global raw sugar prices in recent years.
About 75% to 80% of MSM’s production cost comes from raw sugar, which is benchmarked to the number 11 sugar futures in New York, according to Syed Feizal.
The price of sugar remains relatively elevated at around 15-17 US cents per pound, compared with 12–13 cents per pound in 2021, he noted.
Besides the added cost impact of the SST, MSM, the sugar arm of FGV Holdings Bhd (KL:FGV), said it is also in continued talks with the government on the national sugar price mechanism.
“The new price mechanism that may supersede the current incentive is still being discussed. We can’t disclose anything further just yet,” Syed Feizal said, adding that the industry hopes an agreeable solution can be finalised within this year.
MSM and another local sugar refiner, Central Sugars Refinery Sdn Bhd, have long tried to get Putrajaya to increase sugar prices, but this has yet to materialise. Instead, the sugar industry has been receiving an incentive of RM1 per kilogramme for coarse grains and fine sugar since November 2023.
At the time of writing, shares in MSM were traded two sen or 1.92% lower at RM1.02, valuing the group at RM717.04 million.
