KUALA LUMPUR: Sime Darby Bhd's second quarter net profits, ended Dec 31 2016, more than doubled to RM644 million from RM285 million a year ago, thanks to higher palm oil prices and improvement in fruit harvests.
The group’s fourth quarter revenue rose 4.3 per cent to RM12.34 billion from RM11.83 billion previously.
President and group chief executive Tan Sri Mohd Bakke Salleh said: “This significant improvement in our earnings can be attributed largely to the increase in crude palm oil (CPO) prices and better production of fresh fruit bunches (FFB), especially in Indonesia and Papua New Guinea.”
Sime Darby is the world's largest listed oil palm planter, with more than a million hectares in land bank.
“We are now focused on our internal restructuring and share distribution prior to the proposed listing of our plantation and property businesses,” he told reporters in a briefing here today.
“Let me be clear that the listings are not initial public offerings. Sime Darby will no longer own any stake in its plantation and property businesses when they are eventually split off and separately listed on Bursa Malaysia," Bakke said.
Group-wise, Sime Darby announced an interim dividend of 6 sen per share for the financial year ending June 2017.
Currently, Sime Darby is Malaysia's largest conglomerate, with core businesses in the plantation, property, heavy machinery, motor, seaport operations and healthcare sectors.
The plantation division continues to be the biggest earnings contributor – around 40 per cent of the group’s. Bakke noted that oil palm fruit harvests across Malaysia and Indonesia are starting to show signs of recovery from the prolonged El Niño drought phenomenon.
Sime Darby said the price of palm oil in the second quarter ended Dec 2016 averaged at RM2,835 per tonne, higher than RM2,066 per tonne, a year ago.
On the outlook for the next few months, Bakke said palm oil prices are likely to trade sideways, between RM2,900 and RM3,000 per tonne.
“This forecast is largely due to the (delayed) effect of El Niño-caused drought stunting palm oil supply, and recovery in global demand for palm cooking oil,” Bakke said.
The group’s property division’s profit, meanwhile, went up 61 per cent to RM137 million from RM85 million, posted the previous year. This improvement is largely attributable to contributions of RM95 million from the Battersea Power Station project and a gain of RM58 million on compulsory land acquisition for the Damansara-Shah Alam Elevated Expressway (DASH).
The Battersea Power Station project has also recognised its maiden profit from the completion of two residential block units under Phase 1.
Sime Darby’s industrial division, however, saw a 24 per cent decline to RM55 million from RM72 million posted the year before. The lower profits are due to lower engine deliveries and reduced trading margins across Asian dealerships, mainly in Singapore and China/Hong Kong (HK), despite higher sales of heavy machinery in Malaysia’s construction sector and Australia’s mining industry.
Weak market conditions in the marine and shipyard sectors in Singapore and China/HK also hampered profitability.
Sime Darby’s motor division saw a 7 per cent profit slide to RM136 million from RM146 million previously, due to reduced sales contribution from the luxury segment. This is mainly the result of a downtrend in Certificates of Entitlement (COE) bidding in Singapore, and changes to the Special Consumption Tax in Vietnam.
Sime Darby's motor sales in China, Australia and New Zealand had done well, though, particularly in the luxury and commercial vehicle segments. Despite being faced with challenges such as tighter lending conditions and a weakened currency, Bakke noted that the motor sales operation in Malaysia has sustained its performance on the back of higher contributions from its luxury segment.
The group’s logistics division, finally, saw a 71 per cent profit slump to RM11 million from RM38 million, posted previously. This is mainly due to reduced
average tariff at Weifang Port, resulting from stiff competition from neighbouring ports in China.
There is also recognition of deferred income in the form of a RM19 million government grant posted in the second quarter of the previous financial year ended June 2016.