KUALA LUMPUR: Sime Darby Bhd's third quarter net profits ended March 2016 jumped 60 per cent to RM663.5 million from RM414.7 million a year ago, thanks to gains from asset sales.
President and group chief executive Tan Sri Mohd Bakke Salleh said the group’s higher third quarter earnings were mainly attributable to gains from its asset monetisation exercise.
“We sold two of our Singapore commercial properties for RM600.8 million. We will continue to undertake de-leveraging measures to improve liquidity,” he told reporters at a briefing here, today.
"The group is already three quarters way through its financial year and the numbers, barring the asset sales, reflect the challenging business environment we are operating in,” he said, adding that despite the challenges, the company is still on track to achieve its full year profit target of RM2 billion.
Sime Darby is Malaysia's largest conglomerate with core businesses in plantation, property, heavy machinery, motors, energy and utility and healthcare.
The plantation division is the biggest earnings contributor of around 40 per cent to the group. This is despite lower fruit harvest across Malaysia and Indonesia due to the prolonged drought brought about by the El Niño phenomenon.
Crude palm oil (CPO) price in the first three months of this year was slightly lower at an average of RM2,200 per tonne, compared to RM2,209 per tonne a year ago.
On the outlook for the next few months, Bakke said palm oil prices are likely to trade sideways between RM2,500 and RM2,700 per tonne.
He said this forecast is largely due to the drought stunting palm oil supply and crude oil prices trading around US$45 per barrel.
While the industrial division was impacted by a weaker ringgit, Bakke stressed that there was improved performance from Australia and China. There were better equipment deliveries to the mining sector and higher margin from the rental segment.
He said properties in Australia are the ones associated with the conglomerate’s industrial unit, Sime Darby Industrial Division, the world’s third-largest Caterpillar dealer.
"We are trying to get more out of our assets,” he said.
Sime Darby’s motor division was also dented by a weaker ringgit, intense competition in the luxury segment and lower contributions from truck sales.
Apart from the asset monetisation exercise, Sime Darby's property division face the same sluggish consumer sentiment at its Bandar Bukit Raja, Denai Alam abd KL East townships.