Sime Darby
KUALA LUMPUR: Plantations-property giant Sime Darby reported lower earnings in the second quarter ended Dec 31, 2015 as it was impacted by the lower average crude palm oil (CPO) prices and fresh fruit bunches (FFB) output.
It reported on Wednesday its earnings fell 37.5% to RM273.28mil from RM437.39mil a year ago. Pre-tax profit fell 22% to RM463.54mil from RM592.70mil. Its revenue was however higher at RM11.83mil from RM10.74mil.
Earnings per share were 4.40 sen compared with 7.21 sen. It declared an interim dividend of six sen a share.
In the first half, its earnings slumped 35.8% to RM601.67mil from RM938.09mil in the previous corresponding period. Pre-tax profit fell 26% to RM934.52mil from RM1.267bil.
Its revenue was higher at RM22bil from RM20.86bil.
Sime Darby’s president and group chief executive Tan Sri Mohd Bakke Salleh said: “We are halfway through the earnings reporting period and the numbers reflect the challenging business environment that the group operates in.”
He said the plantations division was impacted by the lower average CPO price and FFB production.
As for the industrial division, the downturn in the mining sector and slowing growth in China continued to have a significant impact while the consumer-driven businesses remain tested by bearish sentiment.
However, Bakke noted the higher profit contributions from the motors and property divisions in the second quarter due to higher sales from the luxury car segment and increased contribution from the Pagoh Education Hub.
He said the management continues to undertake and evaluate deleveraging efforts and rightsizing actions to ensure the group has the right capacity in place to face the tough business conditions.
He cited the RM3bil perpetual subordinated Sukuk programme to improve the Group’s gearing profile.
The group has also embarked on customer centric innovation within each division, driven through focused organic growth prioritisation and increased operational productivity.
“In April this year, the plantation division will begin its field planting of selected premium seeds that will significantly increase oil yield per hectare,” he said.
Q2 performance:
Plantation division
Sime Darby said in Q2, the plantation division posted a profit before interest and tax (PBIT) of RM148.4mi compared with RM269.8mil a year ago.
The decline was largely due to lower profit contribution from the upstream segment at RM79.9mil. However, the reduced earnings from the Upstream segment was partially offset by a much stronger performance in the midstream and downstream operations which recorded a PBIT of RM68.5mil.
It pointed out FFB production across all regions was impacted by severe weather conditions resulting in a 4% decline in the FFB production in Malaysia for the Q2. However, this decline was offset by the increase in Indonesian FFB production of 13%.
New Britain Palm Oil Ltd’s (NBPOL) upstream performance was significantly hit by the prolonged drought caused by El Niño across Papua New Guinea and Solomon Islands, which affected all crops including its cattle business.
The adverse weather, combined with the foreign exchange impact and the lower contracted CPO selling prices, had affected NBPOL’s performance for the quarter. Overall, the division recorded an FFB production of 2.6 million tonnes for the period under review.
Industrial division
The Industrial Division’s PBIT fell 46% to RM68.4mil versus RM126.1mil a year ago due to lower equipment deliveries and margin pressure in the product support business in the Australasia region as a result of the mining downturn.
It also had to take a charge taken for restructuring of RM14.5mil in Australia.
Sime Darby added the China/Hong Kong (HK), Malaysia and Singapore operations recorded poor performances as a result of the weaker business sentiments in the construction, mining, marine and oil & gas sectors.
“The weaker Ringgit Malaysia against the US Dollar has increased the cost of imports in Malaysia, thus lowering margins,” it said.
It also said the division continues to aggressively reduce operating costs to match market conditions while focusing on productivity improvements. These efforts include further staff rightsizing and asset monetisation to ensure profit sustainability in the future.
“The division is also looking at diversifying into alternative energy solutions. The division’s order book stands at RM1.6bil as at Q2 with a time span of between two and 18 months,” it said.
The Motors Division delivered a PBIT of RM145.9mil in Q2 ompared with RM138.2mil a year ago. The 6 percent improvement was mainly due to increased earnings from the Singapore, Vietnam and China operations.
The Singapore and Vietnam operations were the main drivers of the Southeast Asia operations (excluding Malaysia) with a two-fold PBIT increase to RM69.4mil on the back of strong performance from the luxury segment. Higher sales from both the luxury and super luxury operations in China also contributed to the increase in PBIT
Property Division registered a PBIT of RM84.6mil compared with RM62.1mil a year ago, up 36% mainly due to higher contribution from the construction progress at Pagoh Education Hub in Johor and the development works at KL East Melawati township in Selangor along with lower marketing expenses for the Battersea Power Station project.
The division’s unbilled sales stood at RM1.2 billion as at 31st December 2015.
The Energy & Utilities Division reported a PBIT of RM41.6mil for 2Q, down 13% from RM47.8mil a year ago were mainly due to lower throughput from the port operations as a result of the slowdown in the Chinese economy.
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