Sime Darby kick-starts ports sale

Its unit will divest its entire interest in 3 JV companies operating 3 river ports in Jining in the Shandong province

by PRIYA VASU / pic by HUSSEIN SHAHARUDDIN

SIME Darby Bhd’s indirect wholly owned subsidiary, Sime Darby Overseas (HK) Ltd (SDOHK), decided to dispose of its interest in Jining Port and Shipping Development Group Co Ltd (JPSDG) for a net amount of RM181.6 million.

The exercise is to be realised over a period of three years.

SDOHK will divest its entire interest in three joint-venture (JV) companies operating three river ports in Jining in the Shandong province.

SDOHK signed equity transfer agreements to dispose of its entire 70% equity interest in Yuejin, Longgong and Taiping ports in Jining to JPSDG; a shareholders’ agreement to subscribe to a 49% interest in a new JV company; and equity transfer agreements between SDOHK and JPSDG to divest SDOHK’s 49% interest in the JV company over a period of three years.

“The agreements that we have entered into allows for a staggered exit from our investment in our three Jining ports over three years and are very much in line with our strategy to divest non-core assets of the group,” Sime Darby group CEO Datuk Jeffri Salim Davidson (picture) noted in a statement.

With the demerger, the ports business is no longer considered a core business of Sime Darby.

Over the years, Sime Darby had invested a total of 291 million yuan (RM179.8 million) in the Jining ports, which have contributed 141 million yuan (RM87.1 million) in dividends to the group.

However, the operations there are facing continued downward pressure on margins due to intense competition from neighbouring ports and additional costs.

“Given these factors that are impacting the inland port sector in China, we consider the disposal price reasonable.

“Our disposal strategy also very much fits in with the exercise being undertaken by the Jining government to consolidate the fragmented river port industry in Jining. So, it is a win-win situation for us and for the Jining government,” added Jeffri.

State-owned enterprise Jining Energy Development Group Co Ltd, the parent company of JPSDG, has provided unconditional and irrevocable letters of guarantee for JPSDG’s obligations.

These are also supported by bank guarantees provided by JPSDG. The equity transfer agreements to dispose of SDOHK’s entire 70% equity interest in Yuejin, Longgong and Taiping ports in Jining to JPSDG are to be completed within one month.

For the cumulative nine months ended March 31, 2020 (9M20), Sime Darby’s net profit declined 15.84% to RM643 million from RM764 million posted in the same period last year.

This compressed earnings per share for the period declined to 9.5 sen from 11.2 sen posted a year prior.

Sime Darby noted that the decline in 9M20 net profit was on the back of the recognition of a RM129 million deferred tax credit arising from the change in real property gains tax rate since 9M19.