Sime Darby posts net profit of RM244m in Q3

PETALING JAYA: Sime Darby Bhd posted a net profit of RM244 million in its third quarter ended March 31, 2022 (Q3’22), 18.7% lower compared with a net profit of RM300 million in the previous financial year’s corresponding quarter (Q3’21) as the group’s core businesses of industrial and motors were impacted by Covid-19 related disruptions in both China and Australasia.

This saw lower contribution from industrial Australasia which recorded higher operating costs. Further impacting results was a slowdown in construction activity in China, and supply chain constraints which were compounded by the military conflict in Ukraine.

Q3’21 also recorded one-off gains of RM39 million Singapore goods and services tax (GST) refund and RM21 million net reversal of impairment of Eastern & Oriental Bhd.

Its revenue decreased 4.1% to RM10.57 billion from RM11.02 billion in the corresponding quarter in the previous year.

For the nine months period, Sime Darby’s net profit dropped 32% to RM825 million from RM1.21 billion in the absence of the RM272 million gain from the Tesco Malaysia disposal, Singapore GST refund and a RM33 million net reversal of impairment with the sale of stake in Eastern & Oriental. Excluding the one-off gains, net profit for the nine-month period was lower mainly due to reduced contribution from the industrial division, which continued to be impacted by significant contraction in heavy equipment industry volume in China, and lower operating margins in Australasia.

Revenue was down 4.1% to RM31.78 billion for the period compared with RM33.14 billion previously.

Commenting on the results, its group CEO Datuk Jeffri Salim Davidson (pix) said on a core profit level for Q3’22, the group was able to deliver resilient results despite increasingly tough market conditions.

“Motors Malaysia was a standout performer as profits more than tripled from higher vehicle margins and higher profits from assembly operations. The reopening of economies and bullish commodity prices should sustain our business in the coming quarters.

“Despite the challenges inherent in the business environment today, Sime Darby continues to be a supported by a solid balance sheet, broad geographical footprint, and strong brands. We remain committed to our long-term growth strategy and will continue to capitalise on opportunities to rationalise our portfolio and double our efforts to strengthen our core businesses of Industrial and Motors,” Jeffri added.

Meanwhile, the group said the positive outlook for metallurgical coal prices should lead to increased demand for mining equipment in Australia. However, the outlook for the China industrial equipment market remains uncertain, with recent lockdowns in China impacting machines and parts delivery and causing deferment in construction projects.

The current lockdown is beginning to affect the motors operations in China. The impact on the group’s financial performance is uncertain and will depend on the duration of these lockdowns. Demand for luxury vehicles in other markets however, remains strong, although availability of certain models will continue to be impacted by supply chain disruptions.

Taking into consideration the net one-off gains mainly from disposal of non-core assets recorded in the previous financial year, the board expects the group’s financial performance for the financial year ending June 30, 2022 to be lower than the previous year.