Sime Darby’s FY15 net profit down 31%

> The major palm oil player expects CPO prices to average between RM1,900 and RM2,000 a tonne till end September

KUALA LUMPUR: Sime Darby Bhd, which suffered a 31% drop in net profit for the financial year ended June 30, 2015 (FY15), expects crude palm oil (CPO) prices to average between RM1,900 and RM2,000 per tonne from now till end of September.

“Beyond that it is difficult to predict because it is an interplay of so many factors and made worse by what’s happening in the equity market and currency market. So it is a potpourri of bad news,” its president and group chief executive Tan Sri Mohd Bakke Salleh told reporters at a briefing yesterday.

For FY15, the group’s plantation division saw a 39% drop in net profit to RM1.15 billion from RM1.87 billion a year ago due to lower average CPO price realised of RM2,193 per tonne against its forecast of RM2,350 per tonne.

“Our plantation and industrial divisions are both affected by the current soft commodity prices. The outlook for the plantation sector for FY16 currently looks bearish. Many analysts have come out with CPO price for 2015 of around RM2,200 to RM2,300 per tonne.

“We expect that if current prices prevail right up till end of the year, we may close our financial year around RM2,000 to RM2,100, our average price per tonne for CPO. This is an indication,” he said.

The group missed its FY15 net profit and return on average shareholders’ equity targets of RM2.5 billion and 8.5% respectively. It achieved RM2.31 billion net profit and 7.8% return on average shareholders’ equity instead.

Its CFO Datuk Tong Poh Keow said this was mainly due to the lower CPO price realised, industrial division being hit by the slump in coal prices, the motor division affected by the slowdown in China and the Goods and Services Tax implementation in Malaysia, as well as the property division affected by cautious spending and tighter lending policies.

Group net profit for the fourth quarter ended June 30, 2015 fell 17% to RM988.7 million from RM1.19 billion a year ago while revenue rose 3% to RM12.86 billion from RM12.51 billion.

For FY15, net profit was down to RM2.31 billion from RM3.35 billion a year ago while revenue fell marginally to RM43.73 billion from RM43.91 billion a year ago.

The group’s total borrowings stood at RM18.06 billion as at June 30, 2015.

The group has proposed a final dividend of 19 sen per share for FY15. Combined with the earlier interim dividend of 6 sen per share, the total dividend for FY15 is 25 sen per share.

Bakke said it is looking at various options to strengthen its balance sheet as the “turbulence” is not over.

“We have not come up with the decision yet. Currently our gearing ratio is 58% as at June 30, before that it was 38% ... before the acquisition of New Britain Palm Oil Ltd. If we can bring it down to between 30% and 35%, that is a lot more desirable,” he said.

Bakke said Sime Darby is looking at opportunities to pick up good assets or to enter into a strategic collaboration and has received some offers.

On how the weakening ringgit has affected the group’s business, Bakke said about 56% of its revenue is generated outside Malaysia, which acts as a natural hedge.

He also said the listing of the motor division is still on hold due to the current economic climate.