Sime Darby posts RM236 million Q1 net profit

PETALING JAYA: Sime Darby Bhd’s net profit for the first quarter ended Sept 30, 2021 fell 16% to RM236 million from RM281 million in the corresponding quarter last year due to its industrial operations in China absorbing the impact of a slowdown in construction activities in the quarter.

Revenue for the quarter eased 1.9% to RM10.67 billion from RM10.88 billion previously.

The group’s results in the current quarter were impacted by the market contraction for industrial equipment in China and Covid-19 restrictions in certain countries. Some of the restrictions have since eased and together with government stimulus and incentives, sales are expected to recover.

The group said its outlook for the industrial division is mixed. While strong commodity prices and government fiscal stimulus in certain countries would support equipment sales and service, competition from local Chinese manufacturers may continue to impact the industrial business in China.

There is also uncertainty whether recent softening of the China equipment market after last year’s government stimulus would continue. For the motors division, demand for luxury vehicles is expected to remain strong, especially in China. Although there are supply issues for certain models, this may be partly mitigated by better margins from vehicle sales.

However, the risk of Covid-19 restrictions being tightened or reintroduced remains.

The Malaysia Finance Bill 2021 tabled on Nov 9 proposes to tax foreign-sourced income received in Malaysia. As the group has significant foreign operations, the taxing of the foreign-sourced income may materially impact the group’s profit after tax in the future. The actual impact of this proposal cannot be accurately ascertained at the moment pending further clarification on the application of this proposal.

“Taking into consideration the net one-off gains recorded in the previous financial year and barring any unforeseen circumstances, the group’s financial performance for the financial year ending June 30, 2022 is expected to be satisfactory.

Sime Darby group CEO Datuk Jeffri Salim Davidson (pix) said China is a big part of the group’s revenue and profits, and the industrial division was impacted by the slowdown in infrastructure spending in China.

“Our motors’ operations in China continued to deliver a strong set of results with higher sales of super-luxury vehicles. The industrial and motors operations in all other markets performed well considering that many were under some form of movement restriction during the first two months of the quarter.

“We are conscious of the economic and pandemic related headwinds that could impact our performance in our markets across the Asia Pacific region. Nevertheless, we remain positive on long-term prospects in the region, given that we have built strong fundamentals and fired up our businesses to remain resilient and well-positioned to capitalize on growth opportunities,” he said in a statement.

The group has completed the acquisition of Australia’s Salmon Earthmoving Holdings in October that will contribute between RM150 million and RM180 million to the group’s revenue for FY2022.

“Also, it ensures the group’s diversification into the construction rental sector and a new market in New South Wales, Australia. We will continue to look for further growth opportunities and to manage the efficiency of our operations in order to mitigate any impact brought upon by external factors,“ he said.