Sime Darby Plantation posts 4Q loss on disposal of non-core assets

by S BIRRUNTHA / pic by BLOOMBERG

SIME Darby Plantation Bhd (SDP) plans to dispose of more non-core assets after selling its businesses in Liberia, Sime Darby Plantation Investment (Liberia) Pte Ltd and MYBiomass Sdn Bhd.

Its group MD Mohamad Helmy Othman Basha said the planter is working to finalise the disposal of its 50:50 joint venture with Thailand-based PTT Global Chemical called Emery Oleochemicals (M) Sdn Bhd, in the financial year 2020 (FY20).

“FY19 was not a good year for SDP due to a number of factors, especially the issue of legacy and low crude palm oil (CPO) prices. To overcome this, the group has undertaken several plans including the disposal of non-core assets which have not been profitable,” he told reporters at the group’s full-year results briefing in Kuala Lumpur last Friday.

Mohamad Helmy added that the sale of the Liberian business is expected to no longer burden its FY20 performance.

“The disposal of Emery Oleochemical will also contribute to stronger earnings,” he said.

Mohamad Helmy is confident the group is on the right track when it comes to generating revenue from its assets.

For FY20, SDP is expecting to generate RM500 million in cash for the sale of land, as well as RM500 million for the disposal of non-core and strategic assets.

Speaking on the impact of Covid19 and restrictions on palm oil imports by India, Mohamad Helmy said the two events have not had a significant impact on the group.

He said the group did not sell much palm oil to China compared to other companies.

As for the Indian palm oil imports restrictions, Mohamad Helmy said the group has operations in Malaysia and Indonesia and it would not affect the group as India sources its demand for palm oil from Indonesia.

“Indonesia will buy palm oil from Malaysia and we can take the opportunity to explore other countries that Indonesia cannot afford.

“Basically, it does not matter because Malaysia and Indonesia are still major producers of palm oil and have close ties in this,” he added.

For its fourth quarter ended Dec 31, 2019 (4Q19), SDP posted a net loss of RM45 million mainly due to lower production in fresh fruit bunch (FFB) and lower contribution from Sime Darby Oils (downstream) operations.

The planter said the loss was offset by higher CPO prices, lower finance costs and lower tax expense in the quarter.

The group changed its financial year-end from June 30 to Dec 31. Hence, for comparison, the group recorded a net profit of RM172 million during the same period last year.

Revenue for the quarter stood at RM3.37 billion.

In full FY19, the group registered a net profit of RM122 million versus RM729 million profit in FY18.

The performance was affected by lower FBB production, and CPO and palm kernel (PK) prices.

This was partially offset by lower non-recurring losses, finance costs and a tax credit registered for the financial year.

Earnings were impacted by RM322 million in impairment made from the loss-making and discontinued Liberian operations and joint ventures in the oleochemical and biomass businesses in Liberia.

SDP chairman Tan Sri A Ghani Othman said FY19 proved to be challenging for the plantation industry due to unfavourable weather conditions, and low CPO and PK prices for the most part of the year.

Looking forward, the group will continue to place priority on its deleveraging efforts after completing the refinancing of its credit facilities worth RM3.9 billion on marginally improved terms in December 2019.

According to Mohammad Helmy, the refinancing exercise was rated as credit positive by Moody’s Investors Service.

SDP expects stronger palm product prices this year due to lower production in Malaysia and Indonesia tempered by concerns over global economic growth impacted by the Covid-19 outbreak.