PETALING JAYA: Sime Darby Property Bhd (SDP) is finding ways to overcome some of the challenges being faced in the property sector and hopes that these steps will help it maintain its profitability moving forward.
The group said some of the key challenges that were facing the industry at the moment included concerns on rising material costs, labour shortages, vendor capabilities and the continued supply chain disruption.
“It is still quite early to see if profitability will (actually) be affected or not – perhaps this would be clearer in the next quarter or so. As an industry, we do need to sit together and resolve the problems of the labour crunch.
“If we are able to solve this issue of labour I am quite positive that we (industry) will still do very well,” group managing director Datuk Azmir Merican said at a press briefing following its first quarter ended March 31, 2022 results announcement.
He said the continued labour shortage would mean that the group would not be able to see progress in its construction as fast as it would like to – this would in turn likely affect its margins in the bigger picture.
“We can’t continue at the same speed as some projects will have to take a longer time to complete – in business, time is money. We have to maneuver cleverly in order to protect our margins in 2022,” Azmir said.
“We are working with our vendors to resolve the labour issue – we are also introducing variation of price or VOP style contracts.
“So, if material costs do exceed a certain percentage, we will pay the difference. This will reassure our contractors,” he added.
On rising raw material costs, Azmir said that this was a global issue and noted that key construction building materials had risen, with some having seen a higher increase, but it was trying to carefully manage this as well.
“We are also looking at simplification of the design – standardisation of designs – and the materials that go into our products by reducing the usage of materials that cost more and expanding the use of materials that cost less.
“We are looking to use alternative materials.
“We need to deal with this matter carefully as we also understand that consumers are quite price-sensitive,” he said.
Meanwhile, SDP is also continuing to focus on making its transition from a traditional property developer to a real estate company.
“We will not only sell properties but we will also own assets – we will have a fund management portfolio and we will be a fund manager (of properties). Therefore we earn income from managing assets – these are longer-term holdings,” Azmir said.
“For a start, we will include the industrial and logistics business as one of the asset portfolios that we will hold. We will collect money from external investors and we will have a fund manager that will manage this fund,” he added.