Sime Darby net profit falls 53% in fourth quarter

But full-year income beats conglomerate’s target

PETALING JAYA: Sime Darby Bhd’s net profit fell 53.4% to RM571mil, or 8.4 sen per share, for the fourth quarter ended June 30, 2017, from RM1.22bil, or 19.4 sen per share, a year ago, hit by impairments and provisions across its divisions which amounted to RM605mil.

The world’s largest oil palm planter by land size proposed a dividend of 17 sen for the quarter under review.

For the cumulative period, Sime Darby’s earnings were marginally higher at RM2.44bil, or 36.7 sen per share, from RM2.42bil, or 38.6 sen per share, a year ago.

The full-year net profit surpassed its financial year 2017 (FY17) target net profit of RM2.2bil by 11%, outperforming its key performance indicators by 11% despite impairments of RM684mil.

Revenue was 5.5% higher at RM31.09bil from RM29.45bil, a year ago.

Speaking on the sidelines of the conglomerate’s fourth quarter financial results yesterday, Tan Sri Mohd Bakke Salleh conceded that the impairments for FY17 were the largest carried out so far.

“This is an annual exercise that the group has taken but the impairment for FY17 is most significant.

“However, by doing so, we should be able to see some improvements and start on a clean slate as we head towards the listing of our property and plantation division, which has been targeted for November this year,” he noted.

Meanwhile, Sime Darby group chief financial officer Datuk Tong Poh Keow said the impairment exercise was a tedious one, taking into consideration the future goal, terminal value and discount rates.

“When markets conditions change, the assumptions change, for example the weighted cost of capital goes up higher and that has an impact on the value,” she noted.

As to its planned restructuring, Sime Darby Property Bhd will have to purchase land from Sime Darby Bhd, the owner of 8,000 acres either by way of a land swap deal as the group heads towards the listing exercise.

Bakke said that the motor and industrial division had strong fundamentals and enjoys strong support from their principals.

The group is looking at expanding their footprint in 10 countries.

He shared that its industrial division took an impairment of its Bucyrus distribution rights of RM214mil due to the downturn in the Australian mining sector and made a further provision of RM43mil for onerous contracts on the lease of Bucyrus equipment.

The plantation division also made an impairment of RM202mil in the fourth quarter of FY17 in respect of its Liberia operations, and an impairment of RM39mil was made for Emery Oleochemicals in which it has a 50% stake.

On crude palm oil (CPO) production, Bakke said for the second half of this year, the group expects CPO output to be higher.

But this will trend downwards from end October going into first quarter of next year. In terms of fresh fruit bunches (FFB), Bakke said it was looking at a 5% increase in FFB production this year.

Last year, it achieved an FFB yield of about 20.4 tonnes/ha.

Against a backdrop of current soft property market conditions, its property division made a RM70mil provision for inventories in Q4’FY17, while its motors division recorded a goodwill impairment of RM19mil in Vietnam.