China court orders Sime Darby’s JV to pay RM430m

WPS, however, intends to appeal against the decision, says the company


CHINA’S Maritime Court in Qingdao, Shandong Province, has ordered Sime Darby Bhd’s 36.6%-owned joint-venture (JV) company, Weifang Port Services Co Ltd (WPS), to pay nearly RM430 million to contractor CCCC Tianjin Dredging Co Ltd.

The amount represents an outstanding sum of 711 million yuan (RM433.71 million), cost of 3.6 million yuan and late payment interests, Sime Darby said in a Bursa Malaysia filing yesterday.

Sime Darby added that WPS intends to appeal against the decision.

WPS’ other shareholders are Weifang Port Group Co Ltd (38%) and Shandong Hi-speed Transport & Logistics Investments Co Ltd (25%).

Based on Sime Darby’s previous filings, Tianjin Dredging was engaged to construct a 35,000 deadweight tonne main channel in Weifang, Shandong Province. Under the terms of the engagement, both Weifang Port Group and WPS are jointly liable for any payments due to Tianjin Dredging.

The project was completed in November 2016 at a total cost of 1.17 billion yuan, of which 741 million yuan remains outstanding.

On July 31, 2018, Tianjin Dredging filed a lawsuit against WPS and Weifang Port Group, claiming payment of the outstanding sum plus interest.

Last Friday, Sime Darby’s share price fell one sen or 0.46% to RM2.18, to give it a market capitalisation of RM14.83 billion.

Sime Darby group CEO Datuk Jeffri Salim Davidson (picture) said late last year the conglomerate was looking to exit the port business in China as part of its plan to dispose of its non-core assets.

Jeffri said Sime Darby, which operates four ports in China’s Shandong, has witnessed a 5% to 8% decline in throughput, following the US-China trade war.

“Among the non-core assets, our priority is to sell (our) port business in China,” he said.

The proposed disposal is the latest corporate action since the demerger of its plantation and property businesses in December 2017.

Sime Darby is also engaged in the automotive and healthcare sectors, as well as in insurance and hypermarkets sectors.

In July 2018, the company announced that it was selling its China-based water management business, Weifang Sime Darby Water

Management Co Ltd, to Shandong Water Environment Protection Group Co Ltd, a Chinese state-owned company for US$68 million (RM280.16 million) to rebalance its portfolio and focus on its core businesses.

Located 2km north of Yangzi Town in the Shandong Province, Weifang Water operates two water treatment plants with a total capacity of 140,000 cu m a day and has a 220km pipeline network covering two-thirds of the Binhai Economic-Technological Development Area.