Sime Darby sets KPI of RM2b net profit for FY16

KUALA LUMPUR: Sime Darby Bhd has set key performance indicators (KPIs) of RM2 billion net profit for the financial year ending June 30, 2016 (FY16) and 6.3% return on equity, based on its projected crude palm oil (CPO) price of RM2,250 a tonne for FY16.
The group expects CPO prices to average between RM2,250 and RM2,450 a tonne in 2016, due to lower demand and high inventory levels in Malaysia and Indonesia.
Sime Darby president and group CEO Tan Sri Mohd Bakke Salleh said the KPI takes into account the continued contraction of the mining industry in Australia, slowdown in China's economy, weaker ringgit resulting in higher cost of imported inputs, strict lending policies, as well as cautious consumer sentiment.

For the first quarter ended Sept 30, 2015, (Q1FY16) its net profit declined 34.4% to RM328.4 million, compared with RM500.7 million in the previous corresponding quarter, mainly due to weak commodity prices and volatile market conditions.
Revenue increased 0.5% to RM10.17 billion, from RM10.12 billion last year.
The group registered lower pre-tax profits across all its divisions except plantation, which improved 8% in pre-tax profit, compared to the same quarter last year, which is bolstered by improved contributions from Malaysia and New Britain Palm Oil Ltd (NBPOL) operations, as well as realised exchange gain of RM45.4 million.
On the outlook, Bakke expects the business environment to remain challenging and uncertain, noting the recent terror strikes in France and Mali would lead governments around the world to deal with security concerns, adding rise in global conflicts would also impact the cost of doing business.
"This is why I prefer to temper my optimism with caution," he noted.
However, Bakke said the group will remain committed to manage its cost base and accelerate strategic initiatives to improve operating margins and capitalise on market opportunities.
On its motor division, Bakke said he expects to see weak consumer sentiment in Malaysia, due to the weakening ringgit, restrictions on financing and poor consumer spending power that would affect margins and sales volume.
Meanwhile, Bakke said Sime Darby is looking at various options to bring down its gearing ratio, currently at 58-60%, that has risen partly due to the depreciation of the ringgit and the acquisition of NBPOL.
"We are looking at bringing it down to 50%, and later to aim for 40%, which will be accomplished via different instruments, including the RM3 billion perpetual sukuk programme we announced recently ," he added.

Bakke said the group is in the midst of submitting the regulatory documents.