Sime Darby targets RM2.2b net profit for FY17

PETALING JAYA: Sime Darby Bhd, which posted a 37.15% rise in net profit for its first quarter ended Sept 30, 2016 (Q1), is targeting a net profit of RM2.2 billion and return on average shareholders’ equity of 6.4% for the financial year ending June 30, 2017 (FY17).

In Q1, the group’s net profit rose 37.15% to RM443 million from RM323 million a year ago while revenue fell marginally to RM10.1 billion from RM10.17 billion a year ago.

In a filing with Bursa Malaysia last Friday, the group said the improved net profit was mainly due to higher earnings from the motor and the property divisions, as well as lower finance costs.

During the quarter, the motors division’s profit rose 52.9% to RM130 million due to higher contribution from all regions except Vietnam, Australia and Macau.

Higher profit was registered from its Ford and car rental business in Malaysia, BMW in Singapore and truck operations in New Zealand while Hong Kong recorded higher profit due to the gain on disposal of a property of RM30 million.

However, contribution from Vietnam declined due to the impact of the changes to the Special Consumption Tax.

As for the property division, construction progress in several townships was significantly lower during the quarter and no contribution was recognised for the Pagoh Education Hub project as construction works had been substantially completed in FY16.

However, it achieved a higher profit of RM172 million compared with RM102 million a year ago due to the gains on the disposals of 10% equity interest and convertible warrants in Eastern & Oriental Bhd of RM35 million and the entire equity interest in Sime Darby Property (Alexandra) Pte Ltd of RM131 million.

The plantation division’s profit fell RM29 million to RM273 million from a year ago due to lower fresh fruit bunch (FFB) production, lower oil extraction rate (OER) and lower crude palm oil (CPO) sales volume.

FFB production fell 23.8% to 2.154 million tonnes while OER fell from 22% to 21.3% due to prolonged dry season in parts of Malaysia and Indonesia. CPO sales volume fell 30.5%. These were partly mitigated by higher average CPO price realised of RM2,592 per tonne compared with RM2,088 per tonne previously.

The industrial division’s contribution fell 19% to RM51 million due to lower deliveries to shipyard and marine sectors in Singapore as well as weak demand for equipment and product sales support from construction and mining sectors in China/Hong Kong.

Profit from the logistics division was RM5 million lower compared with a year ago due to lower throughput at its ports in Jining, China, as a result of stiff competition from alternate modes of transportation.

The results were partially compensated by higher water consumption and higher throughput in Weifang port following the commencement of operations of the new 3 x 30,000 tonnes berth in August 2016.

“The group’s results are a reflection of the operating environment today which is uncertain on many fronts. Politically and economically, we are experiencing uncertainties and ambiguity in just about every sector,” president and group chief executive Tan Sri Mohd Bakke Salleh said.

The group noted positive signs in the commodity markets in recent months with CPO prices trending at about RM2,800 per tonne on the back of tight supplies with crop production expected to recover in the coming months.

The continued rally in coal prices has boosted mining activities in Australia while the launch of upcoming new models will be a catalyst for the motor division, it said.