KUALA LUMPUR: Sime Darby Bhd expects its industrial business to drive growth in the current financial year ending June 30, 2019, following the encouraging growth of the mining business in Australia.
Its group chief executive officer Datuk Jeffri Salim Davidson said the company there has been under-investment across mining sector in Australia over the last several years and as commodity demand returns, supply is expected to be constrained until investment in new equipment and new mines catch up.
Sime Darby is the world’s third largest Caterpillar dealer, and its dealerships with the US-based manufacturer of heavy equipment and power systems are via Hastings Deering Group of Australia.
“Australia’s mining industry is going full whack now as they (mining operators) did not fix or maintain their trucks. Last year, we have seen a lot of old trucks come in for refurbishment, maintenance and repair – that will continue.
“We starting to see now people are replacing the fleet, so the orders are coming in. Maybe in couple of years, we will see extension of mines where operators will need completely new fleet.
“We are quite positive of what is happening there. We may make most of our money in Australia mining space, seeming there is no mega disaster with the trade war. I think mining fleet replacement activities should continue and this would drive orderbook going up,” he told reporters after Sime Darby’s annual general meeting here today.
Jeffri said the group’s industrial orderbook now stands at RM2.7 billion, with delivery of orders could vary between six months to a year. Last year, Sime Darby’s orderbook size was at RM1.4 billion.
Meanwhile, Jeffri said the group is looking to divest its port business in China, as part of its effort to divest non-core business.
Sime Darby is the primary operator of Weifang Port and owns three major river ports along the Grand Canal in Jining, in Shandong, China.
“The port business in China is one of the is top priority (non-core business divestment). It is more complicated as it is a port, involving government relations that we have to manage. We are juggling with Chinese government too, as they want foreign investors to stay.
“Nevertheless, our port business in China is profitable. We seen some slowdown in throughput, impacted by trade war – but it is still a profitable business,” he said.
During the financial year ended June 30, 2018, Sime Darby’s logistics division has entered into a sales and purchase agreement with Shuifa Group, a Shandong state-owned enterprise focused on the water industry, to divest 100 per cent of the division’s equity interests in Weifang Sime Darby Water Management Co Ltd.
The divestment of the water business is completed in September 2018.