Sime Darby upbeat on plantation unit growth
> Fresh fruit bunch production forecast to increase 6-7% in FY18
PETALING JAYA: Sime Darby Bhd, which posted its highest ever quarterly earnings in the three months ended Sept 30, 2017, is bullish on its plantation segment with an expected 6% to 7% growth in fresh fruit bunch (FFB) production for the current financial year ending June 30, 2018 (FY18).
The conglomerate is in the midst of a demerger exercise and will see the listings of its divisions – Sime Darby Plantation Bhd and Sime Darby Property Bhd – as separate entities on the Main Market of Bursa Malaysia by the end of this month. An EGM will be held on Monday to seek shareholders’ approval for the demerger exercise.
Following that, Sime Darby Bhd's main businesses will be industrial, motor vehicles and logistics, with its focus being principally in the AsiaPacific region.
Sime Darby Plantation CEO Datuk Franki Anthony Dass believes that FFB production will be much better than last year, with the waning effect of the El Nino weather phenomenon.
“Production in Indonesia and Malaysia will increase. It will recover after the El Nino effect,” he said at a media briefing here yesterday in conjunction with the release of the group’s first-quarter results.
For the quarter under review, its FFB production increased 25% to 2.696 million tonnes, with higher crude palm oil (CPO) prices of RM2,693 per tonne.
Franki foresees that CPO prices could hold well at RM2,600 to RM2,700 per tonne until the end of the year. The palm oil contract for February delivery gained RM7 to RM2,739 per tonne yesterday.
Sime Darby Bhd’s net profit more than doubled to RM1.32 billion for the first quarter versus RM522 million in the previous corresponding period, thanks to higher profit contributions from its plantation, property and industrial divisions.
Revenue for the quarter under review came in at RM8.14 billion, 17.5% higher than the RM6.93 billion made in the same quarter a year ago.
Speaking of the likelihood of La Nina, which will bring heavy rainfall, Franki said it will augur well for the plantation industry and floods, if any, will not have a significant impact on its plantation estate.
“It will disrupt harvesting a bit; when the rains recede, then we can go in and harvest,” he added.
Meanwhile, Sime Darby Bhd group CFO Datuk Tong Poh Keow said the plantation division does not have plans to pursue any acquisition at the moment, but will consider it if opportunities arise.
Despite a softer property market, she remains confident on the group’s property launches as most of them are landed properties.
With 20,763 acres of undeveloped landbank in hand carrying an estimated gross development value of RM100.4 billion, she said, Sime Darby Property is poised to grow in an expansion mode.
As at end-September, Sime Darby Bhd’s total borrowings stood at RM2.8 billion, of which 80% is short term and the rest long term. Its debt-to-equity ratio came in at 18%.
Tong believes the group’s financial position will improve given its strong cash flow and rising CPO prices. It registered RM1.22 billion in bank balances and cash as at Sept 30, 2017.
Sime Darby’s share price was unchanged at RM9.00 on some 14.41 million shares done yesterday.