Sime allocates RM940mil capex
Company to use funds mainly to upgrade showrooms for motors division
PETALING JAYA: Sime Darby Bhd is allocating a capital expenditure (capex) of RM940mil for the financial year ending June 30, 2019 (FY19), mainly for the upgrading of showrooms for the motors division.
Sime Darby group CEO Datuk Jeffri Salim Davidson expects good momentum ahead for the motors division, particularly from BMW, which constitutes 60% to 70% of segmental revenue.
“We expect motors sales to be boosted in the second quarter, with new models like BMW 7 Series, Ford Ranger, Hyundai Tuscon, and BMW X5.
“In addition, we are looking to expand luxury car dealerships in China and Australia,” he said, after the group’s first quarter FY19 (Q1FY19) results briefing.
Sime Darby registered a 38% net profit growth in Q1FY19 to RM225mil from Q4FY18.
On a core net profit basis, which excludes one-off gains or impairments, the group achieved a 57.4% increase to RM192mil, compared to the same quarter in the previous financial year.
The one-off items entail a gain on disposal of Weifang Water business of RM78mil, impairment of equity interest in E&O of RM35mil, as well as net corporate forex gain and Yayasan Sime Darby contribution of RM3mil.
“Our operational results have been encouraging.
“The activity in mining and construction sectors in Australia remains strong.
“Our orderbook looks good and demand is high for equipment deliveries, parts, and services from key customers across all parts of the business,” said Jeffri.
The industrial division saw a 9.1% increase in revenue to RM3.22bil and core profit before interest and tax (PBIT) of RM179mil, mainly due to higher equipment sales to the mining and construction sectors in Australia.
“The favourable commodity price levels will drive miners to increase capital expenditures for both equipment replacement cycles and expansion.
“Higher machine utilisation levels shall support strong parts and services sales reve- nue growth,” said Jeffri.
In Q1FY19, there was lower Caterpillar (CAT) equipment deliveries to the construction sector in Malaysia due to the cancellation or deferment of infrastructure projects in line with the rationalisation of government spending.
However, ongoing West Coast Expressway and Pan Borneo Highway will proceed as planned.
Sime Darby’s orderbook for the industrial division amounts to RM2.58bil as of September 30, 2018, representing an 8% increase from the previous year.
Meanwhile, revenue for the motors division rose 8% to RM5.52bil as compared to the same quarter last year, driven by higher unit sales in China and Malaysia amounting to 22,322 units.
It reported a PBIT of RM105mil this quarter, compared to RM112mil a year ago.
The higher sales volume in Malaysia was attributed to the zero-rated goods and services tax (GST) period in July and August.
While more units were sold in China, margins declined due to competitive discounting in the market.