by S BIRRUNTHA / pic MUHD AMIN NAHARUL
SIME Darby Bhd expects its financial year ending June 30, 2023 (FY23), to be challenging amid ongoing headwinds from the Covid-19 pandemic, rising inflation and supply chain issues.
Group CEO Datuk Jeffri Salim Davidson (picture) said the group sees more headwinds than in the past, as inflation is “rearing its head”, as well as interest rates and borrowing costs which are rising, may dampen consumer sentiment going forward.
“Additionally, supply chain issues have not yet been fully resolved, which could affect the group’s future performance.
“The Covid-19 lockdown in China is still impacting our business. It may be quite a difficult year (for FY23), and it is quite hard to achieve the results we want,” he said yesterday, during Sime Darby’s virtual briefing of the financial results for the fourth quarter ended June 30, 2022 (4Q22).
Sime Darby’s net profit for 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.
Revenue for the quarter, however, fell 3.97% to RM10.85 billion from RM11.3 billion previously.
Commenting on the group’s financial performance, Jeffri Salim said Sime Darby reported over a billion ringgit in profits this year, despite the multiple challenges brought on by a combination of supply chain disruptions and higher operating costs due to labour issues.
He noted that the motor division had a tough year, especially in China.
Nevertheless, Jeffri Salim highlighted that Malaysia was a standout performer despite two months of movement restrictions in the financial year, posting more than a 50% increase in profits from operations.
“This was thanks to our BMW and Porsche dealerships, as well as our assembly operations.
“The feather in our cap for FY22 was the opening of our assembly plant for Porsche in Kulim, Kedah, the first outside of Europe, which began delivering locally-assembled Porsche Cayennes in March this year.
“The response from customers has been very encouraging,” he added.
For the industrial division, Jeffri Salim said strong commodity prices drove equipment demand in the group’s key market of Australia. However, higher overhead costs ate into margins.
He noted that in China, a slowdown in construction activity led to further contraction in the heavy equipment market.
“Nevertheless, we have remained focused on our non-core rationalisation plan. We successfully signed the deal to divest Weifang Port in July which signifies our complete exit from the logistics business.
“Moving forward, we will be a focused entity with two strong engines in automotive and heavy equipment,” he added.
On potential mergers and acquisitions, Jeffri Salim commented that Sime Darby is always looking for opportunities to expand the group’s motor division.
“We are always looking for opportunities to acquire companies to expand our motor business, especially in China and other regions, but I can’t disclose more on that,” he said.
Additionally, Jeffri Salim also said the diversified group believes that its skilled workforce, broad geographical footprint and the support of the world’s best brands in heavy equipment and automotive will help it to stay on course.
He said the group’s strong financial standing also allows the group to take advantage of any opportunities that may come about to strengthen its core businesses and build additional capabilities along the value chain.
For 4Q22, Sime Darby declared a second interim dividend of 7.5 sen, with an ex-date of Sept 7, to be paid on Sept 30.
For the full year of FY22, the group’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 (M) Sdn Bhd of RM272 million (net of tax) in the previous year.
Cumulative revenue for FY22 also fell 4.06% to RM42.5 billion from RM44.3 billion for FY21.
Sime Darby’s share price closed two sen or 0.87% higher to RM2.32 yesterday, giving it a market capitalisation of RM15.8 billion.