Sime Darby expects better earnings from motor, industrial segments

By SHAHEERA AZNAM SHAH / Pic By MUHD AMIN NAHARUL

Sime Darby Bhd expects higher contributions from the industrial and motor divisions for the financial year 2019 (FY19), despite the lower earnings registered by the segments in the first three months of this financial year.

Its group CEO Datuk Jeffri Salim Davidson (picture) said the company intends to grow its automotive dealerships, particularly in the luxury segment for markets like China and Australia.

“We are quite confident to register satisfactory earnings, as we have mentioned that our core businesses are the industrial and motor divisions, and we will continue to grow them.

“In terms of strategy in the motor division, we are looking to increase the dealerships in China and Australia for the luxury market, such as the BMW and Rolls-Royce,” he said at a media briefing in Petaling Jaya yesterday.

Its automotive arm Sime Darby Motors (SDM) will roll out several new models in the second quarter of 2019 (2Q19) which will boost sales and revenues to the group.

Group CFO Mustamir Mohamad said the motor division earned higher contributions from Malaysia and China, but lower margins from Hong Kong and Singapore.

“In Malaysia, we saw higher sales during the zero-rated Goods and Services Tax period.

“Lower margins were seen after sales in Hong Kong and Macau due to competition and labour costs, coupled with lower BMW and MINI cars sold in Hong Kong,” he said.

For the period between July and September 2018, SDM sold 22,322 vehicles, of which 5,056 were for the local market, Singapore (4,867 units), the Oceanian market (2,346) and East Asian market (10,053).

The motor division’s profit before interest and tax fell 6.3% year-on-year (YoY) to RM105 million from  RM112 million.

For the industrial division, Sime Darby’s orderbook was at RM2.57 billion as at 1Q18, compared to RM2.37 billion a year ago.

Jeffri said the industrial operation is cyclic-based, but is confident of the results to come in the next 12 months.

“The industrial business is quite cyclical and we had tough years for the past four to five years.

“But the industry value has been very strong as our orderbook is now reaching RM2.6 billion. We are confident to deliver the machines in 12 months,” he said.

Meanwhile, on the government’s deferment of some mega projects, Jeffri said the construction division will only be impacted for a short term.

“The deferment has affected our industrial division, but the businesses will continue. There are other projects that we can leverage on, such as the West Coast Expressway and the Pan Borneo Highway,” he said.

Sime Darby’s net profit fell 83% YoY to RM225 million from RM1.32 billion in 1Q19 due to profit absence following the deconsolidation of its plantation and property divisions.

On Nov 30, 2017, the firm completed the listings of its entire stakes in Sime Darby Plantation Bhd and Sime Darby Property Bhd.

As such, the two divisions have been registered as “discontinued operations” for the group.

Sime Darby’s share price closed at RM2.40 yesterday, valuing the company at RM16.32 billion.

RELATED ARTICLES

Friday, July 28, 2017

Major reshuffle at Sime Darby

Friday, May 22, 2020

Sime Darby keen on M&A deals

Wednesday, December 2, 2020

Sime Darby kick-starts ports sale

Thursday, November 16, 2017

Sime Darby announces boardroom shuffle