Business Review 01 MPM has been a longstanding anchor of QL’s business, generating quality products through deep sea fishing, aquaculture farming, surimi, surimi-based products and convenient wholesome seafood snacks. We uphold our brand promise of safe and quality food by subjecting our processes to external audits for certifications. MPM’s downstream activities meet international standards including Hazard Analysis and Critical Control Point (HACCP) certification, Malaysian Good Agricultural Practice (MyGAP), US Federal Department of Agriculture and EU regulations where applicable, as well as halal certification. Financial Performance The MPM business pillar performance recovered, with YoY revenue rising 15.2% to RM1.34 billion and PBT increasing in tandem by 20.7% to RM242.23 million. The return of normal operations especially the full resumption of our entire fishing fleet translated to business volume recovery. At the same time, the improved selling prices helped to marginally offset the higher production costs and normalised margin. Operational Review Rays of sunshine broke through the clouds that casted shadows on MPM in our last financial year. In FY2023, MPM’s fishing fleet of 29 purse seine vessels equipped with advanced technology of radar and sonar, saw full operations during the fishing season. This business activity has sailed through the tough operating environment brought about by the pandemic to resume revenue contribution. Its performance was nonetheless weighed down by higher fuel cost. Aquaculture activities yielded moderate results in FY2023 as the strong momentum in the first half was hampered by lacklustre grow-out and hatchery performance in the subsequent half. Expansion of our surimi-based production in Indonesia and Johor are progressing well, with completion anticipated in FY2024 as targeted. Upon commission, the Indonesian business unit will add 25,000 metric tonnes annually to QL’s surimi-based production capacity. At the same time, the conversion of a vacant warehouse into a surimi-based production line in Kulai, Johor is on track to increase annual production capacity by about another 7,000 metric tonnes. These two new plants will employ automated machineries similar to our other MPM plants, to improve efficiency and productivity. This business pillar also felt the impact of the changes in labour regulations which was compounded by the increase in the other input costs from higher fuel, electricity and ingredients. Outlook The World Meteorological Organization updated that the El Niño phenomenon is developing, bringing along with it increased heat or rainfall in different parts of the world. Fish landing fortunes will be largely dependent on the weather and climate patterns and this in turn will have an effect on raw material costs on the various business activities in MPM. Fishmeal demand and prices are expected to perform better, attributable to aquaculture activities and Peru’s supply ability. The fish landing experienced thus far heralds a possibly good year and this will be a boon. Likewise, we anticipate demand for surimi and surimi-based products to be stable. The price for surimi is on a downward trend due to competition from countries such as Russia and India. However, the lower prices work in favour of our surimibased segment. Overall, the MPM business pillar will face higher operational costs from labour and fuel prices with the added pressure from the electricity surcharge which came into effect in January 2023 in Malaysia. Barring additional factors, the overall outlook for MPM is positive for FY2024. Business Review Aquaculture farming Deep sea fishing Fishmeal production Surimi production Surimi-based products manufacturing Seafood snacks production Completed new labour quarters in Kulai, Johor Conversion of warehouse into a new production line in Kulai, Johor is near completion Acquisition of 86 hectares in Hutan Melintang is nearing completion New plant being developed in Indonesia MPM ASSETS 9 operating entities OUR VALUE CHAIN KEY DEVELOPMENTS Taking care of our workers and ensuring suitable accommodation for them, we built new labour quarters. The recently completed labour quarters in Kulai, Johor can now house about 380 workers. Additionally, work is underway on the construction of a labour quarter in Hutan Melintang, Perak. The acquisition of 86 hectares of land adjacent to our current site in Hutan Melintang is almost completed, after stalling during the pandemic. This strategic land acquisition will facilitate a seamless expansion of our MPM capacity in the near future. Increasing our use of renewable energy, we installed more solar panels at the Hutan Melintang plant, which generated additional 0.37 MWp solar power to the existing 9.28 MWp output. Challenges The high energy prices anticipated in our FY2022 outlook became a reality and posed a challenge to MPM’s performance as fuel required to operate our fishing fleet became inflated. The improved demand and prices for surimi of 1H FY2023 met with the headwinds of weaker demand and price pressure as supply competition from other countries, in particular India and Russia, intensified in 2H. Revenue (RM million) FY2021 1,257.14 FY2021 260.82 FY2022 1,164.86 FY2022 200.76 FY2023 1,341.70 FY2023 242.23 PBT (RM million) BUSINESS PILLAR Marine Products Manufacturing (MPM) 019 018 QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2023 SEC. PG. PG. MANAGEMENT DISCUSSION AND ANALYSIS 4
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