Sime Darby’s 4Q net profit up 32%, declares 7.5 sen dividend

Revenue for the quarter, however, falls 4% to RM10.85b

by S BIRRUNTHA / TMRpic

SIME Darby Bhd’s net profit for the fourth quarter ended June 30, 2022 (4Q22), rose 31.75% to RM278 million from RM211 million a year ago, underpinned by higher profits from its industrial division and lower tax expense.

As a result, the group registered a higher earnings per share of 4.1 sen from 3.1 sen in 4Q21.

Revenue for the quarter, however, fell 3.97% to RM10.85 billion from RM11.3 billion previously, the group said in a filing to Bursa Malaysia today.

Sime Darby declared a second interim dividend of 7.5 sen for the period, with an ex-date of Sept 7, to be paid on Sept 30.  

This brought its total dividend payout to date for its financial year 2022 (FY22) to 11.5 sen a share, amounting to RM783 million, representing a payout of 71% of net profit.

According to Sime Darby, its industrial division posted a 13.8% increase in profit before interest and tax to RM280 million for 4Q22, which it mainly attributed to a 33.2% increase in profit from the Australasia region from RM199 million to RM265 million.

“This was predominantly attributed to higher equipment and parts revenue, as well as the contribution from the Salmon Earthmoving business, which was acquired in October 2021. This was partly offset by project losses recognised by Malaysian operations,” it noted.

For FY22, Sime Darby’s net profit slipped 22.6% to RM1.1 billion from RM1.43 billion for FY21, mainly due to the gain on disposal of the group’s 30% equity interest in Tesco Stores (Malaysia) Sdn Bhd of RM272 million (net of tax) in the previous year.

Excluding the one-off gain, the group’s full-year net profit was down 4.34% to RM1.1 billion from RM1.15 billion, due to lower profits from its China operations.

The group’s cumulative revenue for FY22 also fell 4.06% to RM42.5 billion from RM44.3 billion for FY21.

On prospects, Sime Darby said the group’s operations for FY22 were impacted by Covid-19 restrictions, particularly in China, and supply chain disruptions which resulted in inventory shortages of certain models and parts.

It added that global economic growth forecasts have generally been revised downwards in the environment of rising interest rates and high inflation.  

“In addition, the ongoing military conflict in Ukraine and rising geo-political tensions have also resulted in increased uncertainty in general business sentiment.

“The outlook for the China industrial equipment market remains uncertain as the recovery of the market volume is highly dependent on fiscal stimulus packages.  

“In Australia, the strong demand for metallurgical coal, particularly from India and Vietnam, is expected to continue driving demand for mining equipment and product support,” it noted.

Meanwhile, Sime Darby also said consumer sentiment is starting to be impacted by slowing economic growth, which may lead to lower motor vehicle sales.  

The group also stressed that the operations in China continue to be at risk of being disrupted by Covid-19 restrictions.  

Despite these challenges, Sime Darby said the division’s order bank remains healthy and sales are expected to improve with the anticipation of new models, subject to availability of inventories.

“With expected one-off gains from disposal of non-core assets pending completion in FY23, the board expects the group’s financial performance for FY23 to be better than that of FY22,” it said.

Sime Darby’s share price closed two sen or 0.87% higher to RM2.32 today, giving it a market capitalisation of RM15.8 billion.