KUALA LUMPUR: Sime Darby Bhd, which posted a lower net profit of RM1.10bil for the financial year ended June 30, 2022 (FY22), is bracing for yet another challenging year ahead amid supply chain disruptions and rising inflation.
Group chief executive officer Datuk Jeffri Salim Davidson said there were more headwinds going into FY23 with rising interest rates that have led to higher borrowing costs for customers, dampening consumer sentiment. He noted that China’s Covid-19 lockdown had also impacted the group’s business.
“It is going to be a tough year and we have to work quite hard to get the results we want,” he said during a media briefing on Sime Darby’s fourth-quarter ended June 30, 2022 (4Q22) results.
However, Jeffri remains “fairly positive” on the outlook for FY23, saying that the group had broad-based businesses throughout the Asia-Pacific region.
“Demand for cars will be fairly strong and there will be a one-off gain of RM250mil from the land disposal in Labu that will be realised in FY23,” he added.
Sime Darby is slated to complete its sale of 760 acres of land in Malaysia Vision Valley (MVV) at Labu to Sime Darby Property Bhd in FY23.
Jeffri said the group would explore opportunities to dispose other parts of the MVV land, as well as to unlock value of its non-core assets through monetisation and opportunistic divestments.
For FY22, Sime Darby’s net profit fell 22.6% to RM1.10bil from RM1.43bil a year ago, due to a one-off gain of RM272mil in FY21 from the divestment of the group’s stake in Tesco Malaysia.
“Excluding the gain, the group’s net profit declined marginally by 4.3% due to lower profits from its industrial and motor business in China, which were impacted by industry-wide contraction in volume for heavy equipment, inventory shortages and Covid-19 restrictions,” it said.
Meanwhile, revenue for FY22 fell 4.06% to RM42.5bil compared to RM44.3bil in the same period a year ago.
For the 4Q22, Sime Darby’s net profit rose 32% to RM278mil driven by increased profits from the industrial division and a lower tax expense.
However, its revenue was down about 4% to RM10.85bil in that quarter.
“We reported over a billion ringgit in profits this year in spite of the multiple challenges brought on by a combination of supply chain disruptions and higher operating costs due to labour issues,” said Jeffri.
The group’s earnings per share jumped to 4.1 sen in 4Q22 from 3.1 sen a year ago.
It has declared a second interim dividend of 7.5 sen per share for 4Q22. This brought its total dividend payout for FY22 to 11.5 sen a share, amounting to RM783mil which represents a pay-out of 71% of net profit.
Meanwhile, Jeffri explained that the motor division had a tough year, especially in China.
However, he said 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, 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.
On potential mergers and acquisitions, Jeffri said the diversified group was always looking for opportunities to expand its motor division.
“We are always looking for opportunities to acquire companies to expand our motor business, especially in China and other countries, but I can’t disclose more on that,” he said.
Sime Darby’s share price closed two sen higher at RM2.32 on Bursa Malaysia yesterday, giving the stock a market capitalisation of RM15.8bil.