KUCHING: Cahya Mata Sarawak Bhd continues to prepare for the commercialisation of its phosphate plant in Samalaju Industrial Park, Bintulu despite the on-going legal dispute with power supplier, Syarikat SESCO Bhd.
Once the legal issues have been resolved, the plant is set to commence commercial operation, said Cahya Mata Sarawak in its 2023 annual report.
The plant was commissioned in August 2022, following which all four yellow phosphorus furnaces were successfully commissioned by December 31, 2022.
Subsidiary Cahya Mata Sarawak Phosphate Industries Sdn Bhd (CMPI) (formerly known as Malaysian Phosphate Additives (Sarawak) Sdn Bhd) is embroiled in a legal dispute with SESCO over the power purchase agreement (PPA) inked by both parties on January 15, 2019.
The dispute began when SESCO billed CMPI for cumulative electricity consumption shortfall and security shortfall amounting to RM266 million as at end-December 2023 despite Cahya Mata contending that the plant is not deemed to have commenced commercial operations.
The dispute was referred to the Asian International Arbitration Centre (AIAC) under the dispute resolution mechanism of the PPA.
SESCO had deemed the PPA to be terminated with effect from May 11, 2023 due to the alleged breach of the agreement by CMPI, and terminated power supply to the phosphate plant in July 2023.
CMPI is claiming against SESCO about RM1.207 billion (or such other sum as the Arbitral Tribunal may determine) for losses suffered as a result of the discontinuation of the electricity supply by SESCO.
In its memorial dated January 3, 2024 served on CMPI, SESCO is counter-claiming about RM342.3 million (as well as interest, cost or such other sum as the Arbitral Tribunal may determine).
The evidentiary hearing, according to Cahya Mata has been fixed for August 26, 2024 before the Arbitral Tribunal.
Cahya Mata Sarawak group managing director Datuk Sri Sulaiman Abdul Rahman Abdul Taib said due to the unavailability of power supply to the phosphate plant, the group’s phosphate division recorded zero revenue and incurred a higher pre-tax loss of RM156.7 million for FY2023 (FY2022:-RM61.31 million).
In FY2023, he said CMS group reported a 19 per cent increase in revenue to RM1.2 billion (FY2022:RM1.01 billion), with the growth primarily driven by higher contribution from the cement and oil tools divisions.
Despite the strong revenue, he said the group’s pre-tax profit fell to RM128.2 million (RM398 million).
“This decrease was largely influenced by significant one-off gains recorded in FY2022, including the recognition of negative goodwill, gains from disposal of investments in associated companies, and the reversal of impairments. Additionally, profit contributions from associates decreased by 56 per cent to RM61.03 million from FY2022’s contribution of RM139.11 million.
“However, taking these one-offs account, our normalised profit before tax (PBT),excluding the aforementioned one-offs, actually increased by an impressive 36 per cent from the previous financial year,” he explained in the annual report.
Reviewing the performance of the group’s business, Sulaiman said the robust performance of the cement division drove its pre-tax profit higher by 82 per cent to RM146 million in FY2023 from FY2022 as revenue climbed 13 per cent to RM681.7 million.
“The recent signing ceremony between Cahya Mata Cement Sdn Bhd and Sinoma Industry Engineering (M) Sdn Bhd serves as a testament to our commitment to Sarawak’s development, reaffirming our integral role in the construction supply chain,
“The establishment of the (proposed) new clinker line 2 not only bolsters our production capacity but also mitigates the risk of supply disruptions. Furthermore, it creates avenues to nearby export markets and facilitates the production of diverse types of cement.
“This initiative not only benefits Cahya Mata but also contributes to enhancing the overall performance of the construction industry in Sarawak,” he added.
The oil tools division reported revenue of RM281.3 million and contributed RM28.3 million to the group’s results.
“We made our entry into the oil and gas industry in September 2022 through the acquisition of Cahya Mata Oiltools Sdn Bhd. This venture has accelerated the group’s growth trajectory, allowing us to leverage opportunities in the global oil tools service businesses across 8 countries.
“The division has made good progress in winning new tenders, and has produced commendable results. In the long run, we anticipate that market demand will strengthen, driven by the industry’s long-term growth prospects and will continue to enhance the group’s profitability,” said Sulaiman.
On the other hand, the road maintenance division posted 12 per cent decline in revenue to RM119.1 million (RM134.6 million), resulting in lower pre-tax profit of RM16.43 million (RM19.37 million) due to lower revenue from instructed works.
In 2023, CMS secured its first routine road maintenance contract in Peninsula Malaysia for the Sungai Besi-Ulu Klang Elevated Expressway (SUKE) with Project Lintasan Kota Holdings Sdn Bhd (Prolintas).
The property division also did not perform well as its revenue plunged by 43 per cent to RM60.2 million (RM105 million), and incurred pre-tax loss of RM2.22 million (pre-tax profit of RM33.2 million) due to slowdown in property sales.
