KUALA LUMPUR: Sime Darby Bhd's fourth quarter net profits ended June 2016 rose 13 per cent to RM1.14 billion from RM1.01 billion, a year ago, helped by recognition of an Indonesian special tax incentive.
The group’s fourth quarter revenue, however, fell 9 per cent to RM11.73 billion from RM12.86 billion, previously.
President and group chief executive Tan Sri Mohd Bakke Salleh said, “Despite prolonged period of uncertainties created by volatility in commodity prices, we have been able to withstand challenging market conditions.”
“We will continue to improve on cash flow generation and cost reduction measures. Earlier this month, we have agreed with Saizen Real Estate Investment Trust (REIT) to sell and leaseback certain of our industrial properties in Australia,” he told reporters in a briefing here, today.
“The monetisation of our assets in Australia will help generate recurring income and lower our gearing. We’ll be able to meet the minimum value threshold of S$300 million set by Monetary Authority of Singapore. The REIT yield is expected to be around 7 per cent, which is the industry's average,” Bakke said.
The properties in Australia are the ones associated with the conglomerate’s industrial unit, Sime Darby Industrial Division, the world’s third-largest Caterpillar dealer.
Group-wise, Sime Darby declared a final dividend of 21 sen per share, bringing the total payout for the year ended June 2016 to 27 sen a share.
Sime Darby is Malaysia's largest conglomerate with core businesses in plantation, property, heavy machinery, motors, energy and utility and healthcare.
The plantation division continues to be the biggest earnings contributor of around 40 per cent to the group. This is despite lower fruit harvest across Malaysia and Indonesia due to prolonged drought brought by the El Niño phenomenon.
Palm oil price in the second quarter of this year averaged at a slightly higher RM2,636 per tonne compared to RM2,242 per tonne, a year ago.
On outlook for the next few months, Bakke said palm oil prices are likely to trade sideways between RM2,550 and RM2,700 per tonne. “This forecast is largely due to lagged effect of El Niño drought stunting palm oil supply and recovery in global demand for palm cooking oil.”
The group’s property division saw a profit decline due to slower sales and deferred launches throughout its townships in Malaysia. Over at the UK, Sime Darby expects Phase 1 of the Battersea Power Station redevelopment to complete by March 2017.
Sime Darby’s industrial division saw higher profits supported by higher heavy machinery sales to construction companies undertaking mega projects such as the 276km West Coast Expressway, widening of the 1,090km Pan Borneo Highway and the build up if the Pengerang Integrated Petroleum Complex.
Bakke expects firm sales of mining equipment from Australia and China in anticipation of recovery in commodity prices and therefore higher coal production.
Sime Darby’s motor division saw strong performance for its luxury segment in Australia, New Zealand, Vietnam, Hong Kong, China and Singapore. In the home front, however, vehicle sales remains impacted by tight lending conditions and higher import cost as the ringgit continues to be weak against most major currencies.
Bakke said it will focus on expanding the Inokom vehicle assembly facility to cater for domestic and regional markets.
Sime Darby plans to a 5 per cent share placement at the average pricing of RM7.51 to raise as much as RM2.38 billion for working capital and to repay borrowings.
“We’ll be seeking shareholders’ approval in a couple of months on this planned share placement.”
On capital expenditure for the current year ending June 2017, Bakke said the group has set aside RM3.55 billion.