Sime Darby’s 1Q22 earnings hit by China construction slowdown

The industrial division of the group was impacted by the slowdown of infrastructure spending in the country 

by TMR / pic by TMR FILE 

SIME Darby Bhd posted a lower net profit of RM236 million for the first quarter ended Sept 30, 2021 (1Q22), as its industrial operations in China absorbed the impact of a slowdown in construction activities in the quarter. 

Revenue for the quarter was 1.9% lower at RM10.67 billion compared to RM10.88 billion in 1Q21. 

“China is a big part of the group’s revenue and profits, and the industrial division was impacted by the slowdown in infrastructure spending in China,” the conglomerate stated in its release yesterday. 

Its motors’ operations in China continued to deliver a strong set of results with higher sales of super-luxury vehicles.

“The industrial and motors operations in all other markets performed well considering that many were under some form of movement restriction during the first two months of the quarter,” group CEO Datuk Jeffri Salim Davidson (picture) noted in the release. 

The group’s industrial division’s profit before interest and tax (PBIT) for 1Q22 was down 18.4% to RM160 million due to a steep decline in profit from its China operations, which faced lower equipment deliveries and rental revenue following the slowdown in China’s construction activities. 

The industrial division’s Australasia business’ pre-tax profit rose 3% on higher equipment revenue as compared with 1Q21, despite reduced margins from parts sales. 

The motors division’s pre-tax profit in 1Q22 improved slightly as Motors China, excluding Hong Kong and Macau, reported a 15% higher PBIT on higher revenue from the sale of super-luxury vehicles, and higher profits in Malaysia. 

“We have completed the acquisition of Australia’s Salmon Earthmoving Holdings in October. This will not only contribute between RM150 million and RM180 million to the Group’s revenue for financial year 2022, but also ensures our diversification into the construction rental sector and into a new market in Australia — New South Wales. We will continue to look for further growth opportunities and to manage the efficiency of our operations in order to mitigate any impact brought upon by external factors,” added Jeffri. 

Sime Darby’s shares closed three sen lower at RM2.2 yesterday, giving it a market capitalisation of RM14.97 billion.