Small rise in car prices seen

Jeffri: It will be slow next quarter but eventually the market would reach an equilibrium.

PETALING JAYA: Sime Darby Bhd, expects a marginal rise in the prices of cars distributed following the implementation of the sales and services tax (SST) on September 1, 2018.

“The price of cars are expected to increase with the implementation of SST,” chief executive officer Jeffri Salim Davidson told the press after announcing the group’s full year financial results ended June 30, 2018 yesterday.

According to him the automotive market is expected to experience a slowdown for a month before eventually balancing out.

“It will be slow next quarter, but eventually, the market would reach an equilibrium,” he said.

The possible introduction of a tax by the government on foreign cars may increase the prices as well, and the company is adopting a ‘wait-and-see’ approach to see how the market balances out among their other competitors.

Meanwhile Sime Darby Motors chief financial officer Nik Muhammad Hanafi Nik Abdullah said the company is looking on how best to absorb the costs, or to pass it to the consumers.

“It would have to depend on other players in the market and on certain models [of the cars],” Nik Muhammad said.

Sime Darby is the official distributor of high-end vehicles including the BMW and MINI in Malaysia.

Yesterday the company reported a net profit of RM163mil for the fourth of financial quarter ended June 30, 2018 (4QFY18) for its continuing operations.

Its continuing operations comprise the industrial, motors, logistics and healthcare businesses after the deconsolidation of Sime Darby Plantation Bhd and Sime Darby Property Bhd last year.

Revenue for continuing operations in the 4QFY18 increased 4.6% to RM8.58bil.

As for the disposal of non-core assets, Sime Darby said it is in no rush to sell its 30% stake in Tesco Stores (M) Sdn Bhd.

While it has a long-term strategy to focus on its three core businesses, Jeffri said management is waiting for the right time to divest the shares in the hypermarket chain.

On the government’s decision to review mega infrastructure projects such as the East Coast Rail Link (ECRL), Jeffri said there would be an impact on the company’s industrial business.

However, other ongoing projects like the Pan Borneo Highway and West Coast Expressway would help negate this impact, he added.

He pointed out that contribution from the local industrial segment was relatively small as compared to China and Australia.

This adoption of a cautious stance comes together with Sime Darby Bhd’s decision to divest the water treatment company in Weifang billed at RM450mil, which is expected to be completed within the second half this year.

This slow divestment is anticipated to extend to their other non-core businesses as well.