Sime Darby keen on M&A deals

The group is eyeing such prospects in China as it will complement the SDM’s operation


SIME Darby Bhd is open to mergers and acquisition (M&A) opportunities that would translate into positive revenue return.

Sime Darby group CEO Datuk Jeffri Salim Davidson said the group is eyeing such prospects in China’s motor industry as it will complement its existing sizeable motor operations, Sime Darby Motors (SDM).

SDM is involved in the retail, distribution and assembly businesses in China, Hong Kong, Macau, Malaysia, New Zealand, Singapore and Thailand.

“I think the opportunity is there. Fortunately, we have the cash available and the ability to gear up. Yes, it is a good time to embark on M&A,” he said during a virtual media briefing on the group’s third-quarter (3Q) financial results yesterday.

Any deal in the coming quarter looks dim as many companies’ outlook remains murky which makes it difficult to fairly price them in a takeover.

“We’ve done a couple of fairly big acquisitions last year in the Gough Group in New Zealand and the BMW business in Sydney.

“We might not have any specific acquisition deals we are working on, but we do have a couple of deals that we are looking at, but the Covid-19 pandemic has slowed things down. Hence, I don’t think it will happen for the next three to six months,” he said.

Sime Darby’s 3Q earnings slumped 48.2% year-on-year (YoY) to RM115 million, while revenue dipped 1.6% YoY to RM 8.43 billion.

The group noted the results include the share of loss (including impairment) of the equity interest in Eastern & Oriental Bhd of RM40 million and foreign-exchange loss from the legacy oil and gas operations of RM14 million.

The previous corresponding periods result also included recognition of the arbitration award received for the Oil and Natural Gas Corp Ltd Wellhead project of RM6 million and gain on disposal of trademark of RM17 million.

Sime Darby CFO Mustamir Mohamad (picture) said the group is bracing for a challenging period with Covid-19 spreading to most markets, as sales are expected to be significantly affected by the coronavirus outbreak for its motor division.

Mustamir said the motor division saw 60,333 units sold in the first nine months of its financial years, a 7.8% drop compared to 65,443 units sold in the same period last year.

“For Malaysia, total industry volume is expected to fall due to the coronavirus outbreak which has halted car production and caused supply and demand shocks,” he said.

Total orderbook for the quarter has seen a 15% decrease to RM2.4 billion as at end-March 2020 from RM2.9 billion in the previous quarter ending December 2019 for the industrial division.

For the cumulative nine months, Sime Darby’s net profit dropped 15.84% YoY to RM643 million and revenue slipped 4.77% YoY to RM28.11 billion.

Sime Darby attributed the group’s net profit declined mainly due to the recognition of a deferred tax credit of RM129 million arising from the change in Real Property Gains Tax rates in Malaysia in the previous corresponding period.

Sime Darby closed 0.5% or one sen higher to RM2.02, valuing the global trading and logistics player at RM13.74 billion.