Sime Darby’s 2Q net profit falls 45.5%, declares 4 sen in dividend

by AZALEA AZUAR / pic by HUSSEIN SHAHARUDDIN

SIME Darby Bhd’s second-quarter net profit for the period Dec 31, 2021 (2Q22), fell by 45.5% to RM345 million year-on-year compared to RM633 million recorded in the same period last year.

This was mainly due to its one-off gain of RM272 million on the divestment of the group’s stake in Tesco Stores (M) Sdn Bhd.

Earnings per share dropped to 5.1 sen from 9.3 sen, the group said in a filing to Bursa Malaysia yesterday.

Its revenue for the period has also dropped to RM10.5 billion from RM11.24 billion.

For the six months ended Dec 31, 2021 (6M22), net profit was down to RM581 million from a year ago in the absence of the gain from the Tesco Malaysia deal.

Core net profit for 6M22 was down 8.2% to RM581 million due to lower contribution from the industrial division which was affected by overall industry volume contraction in China and weaker operating margin in Australasia. Revenue was down 4.1% to RM21.2 billion for the period.

“We obviously benefitted from the one-off RM272 million gain from the sale of the group’s stake in Tesco Malaysia last year. On a purely core profit level, for 2Q22, we were able to deliver resilient results despite tough market conditions, and this is a testament to our strong foundation and the effective strategy which we have put in place,” Sime Darby Group CEO Datuk Jeffri Salim Davidson (picture) said.

“The Chinese economy, driven by consumer-led spending, remains very strong.

However, a slowdown in infrastructure spending led to a decline in demand for heavy equipment, which together with intense competition from local Chinese original equipment manufacturers, impacted our industrial China business.

“Despite partial lockdowns in some of our markets, demand for motor vehicles remained strong. There has been some impact from supply constraints, and this has affected sales volumes, especially in China. On the flip side, our Malaysian operations were boosted by higher margins from car sales while our commercial vehicle deliveries in New Zealand increased significantly during the 2Q,” he added.

Jeffri also said that the group foresees stronger demand for electric vehicles (EVs).

“I think EVs are here and they’re here to stay. The demand for EVs in China and Europe is very strong and climate change and sustainability issues are going to drive them.

“I think you’ve seen some policy statements that government support for EVs, which is going to start driving faster the adoption of EVs. Yes, we’ve got issues in Malaysia, the centres, the infrastructure, do we have enough charging stations?” Jeffri said.

He also mentioned that it has already begun supplying EV charging stations into the market and would sell them to its suppliers such as property developers.

Group CFO Mustamir Mohamed said Sime Darby would be rolling out its fully-EV such as the BMW three series electric, the BMW iX and i4 and the Volvo XC40 Recharge.

These models would enable them to penetrate directly into the EV market and capitalise on this growing segment.

“As far as Malaysia is concerned, all completely built-up models. Until we can see the demand for it is actually big enough for us to locally assemble, then we will then move into completely knocked-down models,” he said.