Sime Darby sets FY19 capex at RM940 million
> Q1 net profit down 9.3% on absence of disposal gain adjustments, core net profit, however, is up 57%
PETALING JAYA: Sime Darby Bhd has allocated a capital expenditure (capex) of RM940 million for the financial year ending June 30, 2019 (FY19), the bulk of which will be used for its industrial and motors divisions.
In Q1 FY19, the group’s net profit from continuing operations fell 9.3% to RM225 million from RM248 million a year ago, in absence of a RM165 million gain on disposal of properties posted in the corresponding quarter in the preceding year and a RM35 million impairment on investment in Eastern & Oriental Bhd (E&O).
Revenue was 8.6% higher at RM8.8 billion from RM8.1 billion a year ago, on higher sales from its motors and industrial division.
“There were some one-off adjustments in our Q1 FY19 results. We made a pre-tax gain of RM78 million from the sale of Weifang Water in China. This was however, partially offset by additional impairment of our equity interest in E&O, made to ensure that it is carried at fair value based on market price,” group CEO Datuk Jeffri Salim Davidson said.
Excluding the adjustments, the group’s core net profit for the quarter was 57.4% higher at RM192 million from RM122 million a year ago.
Total borrowings rose to RM2.96 billion as at end-September from RM2.88 billion as at end-June, mainly due to working capital for the industrial and motors divisions.
Total equity stood at RM14.6 billion while bank balances, deposits and cash stood at RM1.8 billion.
Despite the drop in net profit for the first quarter ended Sept 30 (Q1 FY19), the group expects to achieve satisfactory results for FY19, driven by its industrial and motors divisions.
Jeffri said the industrial division has a strong order book of RM2.6 billion as at end-September largely due to the mining business in Australia. The orderbook a year ago was RM2.4 billion.
“The mining business is driven off the back of coal and coal prices are comfortably cyclically high given that coal prices have come up a lot in the last month. They are still well above the level required for our customers to continue to invest and to carry their businesses forward on a business as usual basis. So the underpinnings for us look strong,” said managing director of the industrial division, Scott Cameron.
The favourable commodity price levels are expected to drive miners to invest in equipment replacement cycles and expansions while higher machine utilisation levels will support parts and services sales revenue growth.
In Malaysia, the deferment of major projects will have an impact on the group’s industrial division over the short term, said Jeffri.
“There will be a short term impact on our business but there will be other projects coming on board. The other businesses in Malaysia in construction and the mining business will support growth,” he added.
For the motors division, he said the strategy is to expand its dealerships, especially in China and Australia.
Managing director of the motors division Andrew Basham said units sold in China in Q1 FY19 was over 10% more than a year ago.
“For October and November, we expect to see similar levels in China. But the real positive, especially for Malaysia, is Ford where the new Ranger is coming out as well as the BMW X5 in China and the 7 series facelift,” he said.
He said BMW makes up about 60-65% of units sold and expects good growth for the rest of FY19. The group sold a total of 22,322 units in Q1 FY19 compared with 20,308 units a year ago.