Sime Darby 1Q net profit driven by plantation, property

Improved performance supported by higher FFB and gains on properties disposal


Sime Darby Bhd noted a better showing by its plantation and property divisions and gains on disposal of properties and investments helped its net profit jump 152% year-on-year (YoY) to RM1.32 billion for the first quarter (1Q) ended Sept 30. This was the group’s highest ever quarterly net earnings, while revenue for the quarter was 17.5% YoY higher at RM8.14 billion.

“The improved performance was supported by higher fresh fruit bunch (FFB) production and higher crude palm oil (CPO) prices, recognition of share of profits from the UK’s Battersea Power Station development project, higher heavy equipment deliveries in Australia and China, recognised gains on properties and investments disposals, and reversal of depreciation and amortisation,” president and group CEO Tan Sri Mohd Bakke Salleh said in a statement yesterday.

Group CFO Datuk Tong Poh Keow (picture) acknowledged the conglomerate’s earnings were largely aided by sales of certain assets. “This is part of the entire restructuring of the group and the review of our portfolio of assets, to create value and strengthen the balance sheet of all three companies post-de-merger,” she said at a press briefing in Kuala Lumpur yesterday.

The group is now in the middle of spinning off its plantation and property businesses into two new listed companies, effectively splitting the group into three separate entities with the trading and logistics business remaining with the parent company.

It has obtained the relevant approvals from the Securities Commission Malaysia and Bursa Malaysia Securities Bhd.

A circular to shareholders was despatched on Nov 4, giving notice for an EGM to be convened on Nov 20 and detailing the listing reference price range and corresponding market capitalisation for Sime Darby Plantation Bhd and Sime Darby Property Bhd.

The listing of the entities is slated for the end of this month. As at end-September, Sime Darby’s borrowings stood at RM2.8 billion with long-term borrowings comprising 20% of the amount and short-term borrowings the rest.

Its debt-to-equity ratio stood at 18%, while cash amounted to RM1.9 billion. The group’s plantation division recorded a net profit of RM1.02 billion in 1Q of financial year 2018 (1QFY18) versus RM151 million posted the year prior. This was due partly to gain on sale of land to Sime Darby Property of RM676 million and a one-off reversal of accruals of RM95 million.

FFB production improved to 2.7 million metric tonnes (MT) in 1Q from 2.15 million MT previously, while average CPO price realised rose to RM2,693/MT from RM2,592/MT a year ago.

Plantation division MD Datuk Franki Anthony Dass said the group’s FFB production for the FY18 ending June 30, is projected to rise between 6% to 7% YoY.

“We expect FFB production up to the end of 2017 to be much better than last year. CPO prices are estimated to hold at between RM2,600/MT and RM2,700/MT until end- 2017,” he said.

The property division’s net profit jumped to RM422 million in 1Q18 from RM149 million in 1Q17 on gains on disposal of its 40% stake in Seriemas Development Sdn Bhd of RM278 million and the sale of Malaysia Land Development Co Bhd of RM41 million.

It also gleaned RM87 million in share of profits from the Battersea project in London, and higher contribution from the Elmina West, Elmina East and Serenity Cove projects.

The group’s industrial division recorded a pretax profit of RM247 million for the quarter under review versus RM51 million a year ago, driven by gain on disposal of three properties in Australia of RM156 million under a sale and lease-back arrangement, as well as higher equipment deliveries and product support sales to the construction and mining sectors in Australia and China.

Pretax profit for the motor division slid 14% to RM112 million in 1Q18 from RM130 million 1Q17, mainly from the impairment of the distribution rights in Vietnam of RM61 million following the group’s decision to exit the market.

The logistics segment’s pretax profit grew 50% to RM18 million in the quarter under review against RM12 million last year, largely attributable to a foreign-exchange gain on a joint-venture loan, higher general cargo throughput at Weifang Port, and higher sales volume.