Sime Darby sales in China ‘almost back to normal’

Its sale of cars, machinery nears pre-coronavirus levels

PETALING JAYA: Sime Darby Bhd says its sales of cars and construction machinery in China are “almost” back to its pre-coronavirus crisis volume after its business there re-opened last month.

Group chief executive officer Datuk Jeffri Salim Davidson said its motor division, which mainly sells BWMS, has rebounded in the past one month due to pent-up demand after a long period of lockdown in China.

“We were quite surprised by China. Our operations in China are now almost back to normal.

“Demand for cars and hydraulic excavators there appears to have rebounded and both the motor and industrial operations have had a relatively strong April,” he told reporters at a press conference.

Sime Darby’s net profit for the first three months of 2020, however, took a hit from the national lockdown in China from February to March.

For the first quarter ended March 31, Sime Darby’s net profit nearly halved to Rm115mil from Rm222mil a year ago due to lower sales of hydraulic excavators and cars, as well as lower volume handled at its ports in China due to the Covid-19 crisis.

Its revenue for the quarter dropped 1.6% to Rm8.43bil from Rm8.57bil previously.

Cumulatively, for the first nine months of the financial year ending June 30, 2020 (FY20), Sime Darby posted a 16% drop in net profit to Rm643mil, dragged by a recognition of a Rm129mil million deferred tax credit arising from the change in real property gains a year earlier.

This brought its earnings per share (EPS) for the period down to 9.5 sen from 11.2 sen.

Sime Darby said, excluding the tax credit, the group’s net profit would be 1% higher because of the strong performance of its FY20 first-half that will help buffer the impact of the Covid-19 pandemic in the second half of the year.

Its revenue for the first nine months of FY20 rose 4.8% to Rm28.1bil from Rm26.8bil previously.

Moving forward, Jeffri said despite the increase in demand in China post lockdown, the group remained cautious for the rest of the year as other countries such as Malaysia only went into lockdown from March to early May.

“At this point, we don’t know how fast the rebound will be in other countries. But the diversification in terms of businesses and geographical presence would help Sime Darby to ride out the current crisis,” he said.

The group derives 40% of its revenue from China, 30% from Australia and New Zealand, while the remaining 30% came from Malaysia and other countries in Asia such as Singapore.

Its main businesses include the trading of industrial equipment, luxury car distributorships including BMW, and hospital operations under the Sime Darby-ramsay partnership.

The group is one of the top-five largest Caterpillar and BMW dealers globally.

Despite the uncertainties, Jeffri said the current situation provides opportunities for the group to continue to look for new assets to acquire.

Armed with Rm2.1bil cash, he said Sime Darby was in a sweet spot to acquire more car dealership assets.

“It is a good time for mergers and acquisitions (M&AS) and we will continue to dispose our non-core assets such as our stakes in property developer Eastern & Oriental Bhd (E&O),” he said.

Sime Darby made an Rm99mil impairment from its 12% equity interest in E&O in the first nine months of FY20.

On the group’s ongoing sale of its 30% stake in Tesco Malaysia, Jeffri expects that to be completed by the end of this year and said the group was targeting to maintain its dividend payout of not less than 50% from its profit this year.

“We were quite surprised by China. Our operations in China are now almost back to normal.” Datuk Jeffri Salim Davidson