PETALING JAYA: Sime Darby Bhd
is guiding for a “consistent” core performance in the financial year ending June 30, 2026 (FY26), after posting weaker results in FY25 amid challenges in its motor division.
Core net profit for FY25, adjusted after one-off items, slipped 11.3% year-on-year (y-o-y) to RM1.17bil, while core profit before interest and tax (PBIT) eased 2.9% to RM2.62bil.
Including one-off gains, Sime’s net profit declined 37.7% y-o-y to RM2.06bil, largely due to the absence of a RM2bil gain from the disposal of its healthcare unit last year.
The latest results, however, were supported by the first full-year consolidation of UMW Holdings Bhd, as well as a RM901mil gain from the disposal of Malaysia Vision Valley land in Negri Sembilan.
Meanwhile, revenue for FY25 grew 4.4% y-o-y to RM70.06bil.
Its shares closed up 17% higher at RM1.90 yesterday, topping the active list after the results drove an afternoon surge.
In FY25, Sime’s motors division was the hardest hit, with core PBIT plunging 55.5% y-o-y to RM363mil.
Group chief executive officer Datuk Jeffri Salim Davidson said the luxury auto segment in Australia, New Zealand and Malaysia has suffered due to rising competition from Chinese carmakers. “It’s not so much in China – that was already weak last year.”
In China, the group’s motor division posted a wider loss before tax of RM140mil in FY25, as margin pressure persisted, even though vehicle sales held relatively steady at 67,068 units versus 70,816 in FY24.
Jeffri noted that discounting remains “at ridiculous levels,” though recent government intervention has eased the average discount rate from 34% to 31%.
BMW remains Sime’s biggest partner in China. “While they (BMW) are losing a little bit of market share, they are playing in the upper segment. We still feel, long term, there will continue to be market demand in China for BMWs,” he said.
Jeffri highlighted that Sime’s team in China has been proactive in cutting costs, optimising overheads and right-sizing operations.
On this, Sime Motors managing director Andrew Basham said the group has closed 15 non-BMW branches and plans to shutter another six in the coming months.
By April next year, only eight will remain – comprising three Volvo, three Genesis, and two Kia outlets.
He added that BMW operations will continue with 22 branches.
When asked whether the group is confident to stem the losses in the China motors division by FY26, Andrew replied: “Reasonably confident.”
Jeffri explained that Sime’s established BMW branches are supported by a large base of returning after-sales customers, which helps sustain profitability. In contrast, he said newer outlets take several years to build sufficient sales volume to generate meaningful after-sales income.
Meanwhile, Sime’s UMW division saw core PBIT more than double to RM959mil, as the previous year’s figure only reflected six months of contribution due to the alignment of financial years following Sime’s acquisition of UMW.
Jeffri noted that while the luxury segment in Malaysia is being challenged by Chinese marques, demand for Perodua and Toyota vehicles should remain resilient. In the first half of 2025, Toyota held an 11.9% share of the total industry volume, while Perodua maintained its lead at 44.5%.
Sime’s industrial division continued to be the group’s largest contributor, recording RM1.31bil in core PBIT, although this was 9.9% lower than RM1.45bil reported in FY24.
Jeffri attributed the decline mainly to foreign exchange movements, noting that the stronger ringgit reduced the value of Australian earnings when consolidated.
He added that Caterpillar’s earlier price reduction also temporarily squeezed margins “as we ran down inventory”, but this is expected to reverse following a price increase from July 1.
Fundamentally, however, he said the division remains solid, underpinned by the strength of the mining sector in Australia and the boom in data centre projects in Malaysia, where Sime supplies standby generator sets.
He said Singapore, too, has seen an uplift from both data centre demand and a recovering marine business.
China, however, remains a challenging market for Sime’s industrial division due to subdued construction activity and intense competition. Regardless, it is still a profitable market for Sime.
As of end-June, the industrial division had an order book of RM4.5bil.
Notably, Jeffri said more than half of the division’s revenue now comes from high-margin parts and services, which provide recurring income streams for up to 20 years after a machine sale.
For the fourth quarter ended June 30, 2025 (4Q25), Sime’s revenue fell 5.5% y-o-y to RM17.76bil.
Net profit, however, surged more than eightfold to RM763mil, compared with RM89mil in 4Q24.
The group declared a 10 sen per share dividend for the quarter, bringing total dividends for FY25 to 14 sen a share. This represents a payout ratio of 82%.
Jeffri said the surge in operating cash flow enabled Sime to pare down debt to RM9.57bil from RM10.83bil. The group’s net gearing stood at 0.28 times.
