Sime Darby bullish on industrial division ops

Group set to ride on thriving mining sector in Australia

KUALA LUMPUR: The thriving mining sector in Australia, driven by the recovery in coal prices, is set to give Sime Darby Bhd a boost this year.

The group, which is involved in the provision of industrial equipment, servicing and repairs of heavy vehicles – among its other businesses in the Australian mining space – expects to see a significant jump in contribution from the sector this year.

Last year, the industrial segment, which is one of the group’s two core businesses, saw 55% of its total sales come from Australia.

Sime Darby’s order book in Australia, which mostly consists of mining equipments, saw about 300% jump from FY17 to FY18.

Group chief strategy officer Datuk Thomas Leong said the group expected the jump this year to be even higher.

Adding to the bright prospects is the potential doubling of Sime Darby’s market share in the mining space, from slightly over 7% now to about 15%, with its recent acquisition of Brisbane-based Heavy Maintenance Group (HMG) Pty Ltd for AU$58mil (RM172mil).

HMG is a leading specialist provider in the manufacture, refurbishment and surface finishing of equipment components to customers in Australia and other parts of AsiaPacific.

It services the mining, oil and gas and other heavy industries that require the manufacturing or refurbishment of hydraulic cylinders, sophisticated engineering and protective surface finishing coating.

“Two years ago, the mining sector was relatively quiet due to depressed coal prices.

“Now, with the recovery in coal prices, the Australian mining companies have ramped up operations, and the trucks and machinery are being worked full-time.

“A cycle like this usually lasts about four to five years,” Leong told StarBiz.

In July, the Australian thermal coal prices broke through the US$120-per-tonne level for the first time since 2012, driven by strong consumption in Asia.

In financial year 2018 (FY18), Sime Darby’s industrial segment recorded a profit before interest and tax of RM612mil, compared to a loss of RM4mil in the previous financial year.

Earlier at a press conference, group CEO Datuk Jeffri Salim Davidson said the group had several targets for FY19, one of which is to grow revenue and optimise costs.

The growth in revenue, he said, would be driven by recovery in the mining business and sales of car parts in the automotive segment.

On healthcare, Jeffri said Sime Darby is looking to acquire hospitals in the region. The group now has six hospitals – three in Malaysia and three in Indonesia via a joint venture.

On the divestment of non-core assets, he said among its priorities is to eventually divest its ports business in China.

However, he said, this will likely take some time.

“Business at the ports is still profitable although it is slowing slightly due to the trade war,” he said.