The year 2023 is shaping up to be a year of uncertainty as forecasted by economists. The International Monetary Fund (IMF) titled their world economic outlook published in April as “a rocky recovery”. The recent financial sector turmoil, stubbornly high inflation, ongoing effects of geopolitical conflicts and the lingering impact of three years of COVID-19 have taken a toll on economies around the world. While prices of energy and food have eased, underlying pressures are persisting. This created a landscape that will test the resilience and game plan of businesses. There are bright spots to consider. Asia will contribute about 70% of the global growth in 2023, powered by the two most populous countries, China and India. The three countries where QL operates in, Indonesia, Vietnam and Malaysia have a projected share of 7.2% of global growth. On the local front, Bank Negara Malaysia has projected moderate growth for 2023 in response to a slower global economy. Malaysia’s economy will be largely dependent on domestic demand and the labour market. Headline inflation is expected to hover between 2.8% to 3.8% this year while the green shoots of recovery in the labour market continue to sprout. Agro-related activities such as ours are sensitive to commodity price movements. The Black Sea Grain Initiative helped remediate the shortage of commodity supply and moderate commodity prices, including corn and soybean meal which are essential ingredients in animal feed. After a 13% increase in 2022, agricultural prices are projected to decline 5% in 2023, but still remain above pre-pandemic levels according to World Bank. The prices will continue this gradual decline if there are no unforeseen major disruptions; however, this will be offset by a weaker ringgit. It is thus no surprise that food security has gained limelight as a national priority. Malaysia is ranked 41st on the Global Security Food Index (GSFI) with a reliance on imports for essential food products. In terms of sustainability and adaption, Malaysia ranks lower, at 57th spot out of 113 countries. The total food deficit recorded by our nation since 2000 is RM310.5 billion as reported by the Department of Statistics Malaysia. Malaysians, especially the middle class, are increasingly demanding higher quality food products, often fulfilled through food imports. As the country continues to rely on food imports, the exchange rate plays a major factor in ensuring food security. Favourable export prices for overseas buyers will stimulate demand for QL’s products. At the same time, tighter cost management will enable QL to reign in input costs and contribute meaningfully to Malaysia’s food security agenda. In aiming towards contributing to national food security, QL always watchfully monitors developments of weather patterns. After three years of La Nina, hints of El Nino have begun to emerge, with hot and dry weather expected to affect agriculture activities. QL is not immune to it as this weather can possibly have a positive impact on fish landing. QL vigilantly keeps a careful eye on the ever-shifting horizon, exercising risk management and strategic decision making to navigate market changes in a timely manner. Uncertainties within the market will be carefully manoeuvred to deliver on our mission for the benefit of all. Through it all, we will be guided by our strategy, 4C approach and governance to be cautiously optimistic that we can deliver another year of growth in FY2024 despite challenges of the economic environment. Group Outlook KEY HIGHLIGHT Opportunities abound for a producer such as QL, which harnesses agro resources to create nourishing food and operates in the economic growth corridor of the world. QL is actively scaling up our sustainability action plan, recognising the significance of natural capital in producing nutritious and affordable food for the masses. group Outlook 027 026 QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2023 SEC. PG. PG. MANAGEMENT DISCUSSION AND ANALYSIS 4
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