IJM sees better performance from construction division in mid-2019

REHDA President Dato Soam Heng Choon.AZHAR MAHFOF/The Star

KUALA LUMPUR: IJM Corp Bhd expects its construction division to perform better from the second half of next year as its current projects are still at the initial or foundation stages.

Chief executive officer and managing director Datuk Soam Heng Choon (pic) said the overall construction sector in Malaysia is now in a consolidation phase as it is facing a slowdown due to a cut or delay in government projects and a slower property market.

“We have RM8.8bil of outstanding construction order book with over RM2.1bil in unbilled sales which will keep us busy for the next three years.

“However, the projects are largely at the initial or foundation stages like Affin Bank (headquarters), UOB Tower and Mitsui Shopping Mall projects.

“Once the foundation stages are completed, the progress would be faster, then the recognition of the turnover and profit would be better,” he told reporters on the sidelines of the Pantai Sentral Park Interchange launching ceremony here yesterday.

The launching ceremony was officiated by Deputy Works Minister Mohd Anuar Mohd Tahir. Also present was Malaysian Highway Authority director-general Datuk Aziz Abdullah.

On the property market, Soam said the group, the developer of two big townships namely Seremban 2 in Negri Sembilan and Bandar Rimbayu, Shah Alam, was expected to continuously launch new projects.

However, the local property market was expected to remain challenging as the key issues of price affordability, overhang in high-rise residences, rising cost of living and tight financing would continue to have a dampening effect, he said.

For the second quarter ended Sept 30, 2018 IJM Corp reported an 80.8% drop in net profit to RM21.92mil due to weaker earnings posted by all its major divisions compared with RM114.23mil a year ago.

The group's construction, property development, manufacturing and quarrying, plantations and infrastructure divisions all posted weaker earnings in the quarter.

Soam said the weaker performance for the quarter was due to impairment of its toll highway in India, which it had already sold, and was also contributed by foreign exchange loss due to the plantation sector’s exposure in Indonesia as well as depreciation in the Indian rupee.

“With the rebound of the two currencies recently, we are already seeing an improvement of RM70mil-RM80mil to our bottom line,” he added.

For the plantation sector, Soam said it is now in a very challenging period due to high inventory and the fall in crude palm oil prices but he believed the prices would rebound in the first quarter of next year after the peak crop season has tapered off.

On the new 2.8km Pantai Sentral Park interchange launched yesterday, he said it was fully funded by the group at a cost of RM98mil as part of its corporate social responsibility exercise.

As a township developer, he said connectivity was the key, hence the need to ensure that access roads into and within its development were properly planned to cater for the evolution of the communities.

To date, the group had spent about RM225mil to fully fund the interchanges and flyovers to improve connectivity for its townships, he added. — Bernama

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