Datuk Jeffri Salim Davidson, group CEO, Sime Darby — CHAN TAK KONG/The Star
PETALING JAYA: Sime Darby Bhd
, which recorded a double-digit year-on-year growth in its core earnings for the first half of financial year 2025 (1H25), anticipates full-year core results to be “about the same level” as its financial year ended June 30, 2024 (FY24).
Group chief executive officer Datuk Jeffri Salim Davidson said the company remains optimistic despite challenges in China, where the automotive market continues to face intense competition and oversupply issues.
“There are just too many cars being produced, particularly by the Chinese original equipment manufacturers.
“We’re seeing the export of excess capacity and discounting spill over into other markets,” Jeffri told a press conference in conjunction with the group’s 1H25 financial results briefing yesterday.
“It will remain tough in China, and I think it’s getting a little bit tougher in some of the other markets, frankly.”
Meanwhile, Sime Motors managing director Andrew Basham noted that the motors division of Sime Darby closed nine dealerships in China during 1H25, with two or three more expected to shut in the coming months.
However, he said the group plans to retain some sites, shifting their focus to used car sales.
“Just to clarify, the one that we closed in China is non-BMW. BMW is still operating well,” he said.
Sime Darby currently operates 23 BMW dealerships in China.
While acknowledging that newer dealerships are facing short-term profitability issues, Andrew expressed confidence that they would turn profitable in the future.
“Ten of them are new and they are the ones hurting us,” he said, adding that the older ones remain profitable, though not at the high levels previously recorded.
“We are expecting in March, when they (BMW) announce the subsidy report, that there will be some extra funding for the new dealerships.”
To strengthen cash flow, Jeffri said the company is also rationalising its China operations by removing inventory from the system and optimising costs.
“I think more importantly, we’re taking inventory out of the system to generate stronger cash flows.
“So there’s a lot of these things that we’re doing. So I guess it’s almost business as usual nowadays in these tough times,” he added.
Meanwhile, Sime Darby’s industrial division managing director Dean Mehmet said the division remains resilient, with strong activity in Australia.
However, he noted that margins have been temporarily squeezed due to parts price decreases in July 2024 and January 2025.
“It takes about four to five months for the slightly higher cost of inventory to flow through, so margins get squeezed for that period,” he explained.
“But the activity is still very solid from an industrial perspective in Australia.”
Jeffri explained the impact of parts price fluctuations on margins, noting: “Say you buy a part for US$100, right, and you sell it for US$120. When there’s a price decrease, you’re now buying it for US$90 and selling it for US$110.
“But you’ve got all the inventory that you originally bought at US$100, and are selling it for US$110.
“So, your budget is compressed for a period until your stock goes. And then after three months, four months, right, and then it gets back to your normal margin.”
Looking ahead, Mehmet anticipates a potential parts price increase in July 2025.
When asked if the group plans to stock up on inventory, given the current price drop, the industrial division head said: “There’s a balance between what we might want to pre-order at a slightly lower price and what sort of returns that our shareholders expect.”
Addressing global market volatility, particularly regarding US President Donald Trump’s tariff policies, Mehmet noted that while customers remain cautious, underlying demand remains stable.
“There’s certainly uncertainty. They’re just wary. They’re not worried.
“The United States needs Asia, and Asia needs the United States.”
Meanwhile, Jeffri said he is less concerned about the industrial division’s outlook, citing steady demand and pricing for commodities.
“I think where it is getting tough is obviously competition in the motor space. More generally, you know, the competition in China.”
Despite these challenges, Sime Darby remains focused on navigating the evolving market landscape.
“It should be there or thereabouts compared to last year,” Jeffri said, reiterating his expectation for FY25 performance to be in line with FY24.
For the second quarter ended Dec 31, 2024 (2Q25), Sime reported a 14.2% increase in revenue to RM17.73bil from RM15.52bil in 2Q24.
Net profit stood at RM305mil compared with RM2.3bil in 2Q24, which benefitted from a RM2bil gain on the disposal of Ramsay Sime Darby Health Care in December 2023.
> TURN TO PAGE 2 Sime Darby’s performance was primarily driven by its UMW division, which contributed RM272mil in 2Q25 profit before interest and tax (PBIT) on the back of higher Perodua vehicle sales.
Its industrial division, however, saw a marginal 4% decline in PBIT to RM337mil, due to reduced profits in its Australasian operations.
The decline was attributed to lower parts prices, impacted by a weaker Australian dollar against the US dollar.
However, stronger contributions from Malaysian and Singaporean operations for the segment helped cushion the effect.
Meanwhile, its motors division posted a 38.5% drop in PBIT to RM118mil, dragged by lower vehicle sales in Malaysia and Australasia.
This decline was partially offset by higher electric vehicle sales in Singapore.
For 1H25, Sime Darby reported a 22% increase in revenue to RM35.99bil, up from RM29.5bil in 1H24.
Net profit declined by 61.6% to RM1.1bil, compared with RM2.88bil in 1H24.
However, net profit from continuing operations rose 32.9% to RM1.1bil in 1H25, up from RM826mil in the corresponding period last year, as discontinued operations contributed RM2.05bil in 1H24.
Sime Darby announced an interim dividend of three sen per share and a special dividend of one sen per share for FY25. Its shares closed up 2.7% to RM2.28 yesterday.
