Sime borrowings seen falling after asset sale, share placement
KUALA LUMPUR: Sime Darby Bhd’s borrowings are expected to decline to about RM15.2 billion following its recent asset disposals and share placement.
This would reduce the group’s consolidated debt-to-equity to about 0.40 time, said Malaysia Rating Corp Bhd (MARC) yesterday.
MARC said Sime Darby could expect improved earnings from its plantation division as crude palm oil prices had recovered in recent months to about RM2,600 per tonne.
The division recorded an average of RM2,242 per tonne between July 2015 and June this year.
The rating agency, however, noted that lower production volumes in Malaysia and Indonesia, as a result of dry weather conditions, could moderate cash flow generation.
Notwithstanding the improved prospects of Sime Darby’s plantation division, the rating agency remains concerned on the continued subdued performance of its other divisions, in particular the property and industrial divisions.
Elaborating on the asset disposals and share placement, MARC said Sime Darby had made steady progress in using the proceeds to pare down its borrowings, which rose sharply following the acquisition of New Britain Palm Oil Ltd for RM6 billion in March last year.
The acquisition contributed to a substantial increase in consolidated borrowings to RM18.1 billion as at end-June last year, pushing its leverage to 0.57 time, it added.
Sime Darby had disposed of property assets in Malaysia and Singapore, generating RM816 million in net gains at end-June.
The group also completed the sale of another property in Singapore and disposed of a 10 per cent equity interest in Eastern & Oriental.. “These disposals are expected to provide gross proceeds of about RM570 million,” said MARC.
In addition, Sime Darby completed its share placement exercise, raking in proceeds of RM2.4 billion. Of this, RM1.2 billion will be used to reduce its borrowings.
MARC said on the cards were the disposal of industrial properties in Australia worth about RM1.1 billion to a real estate investment trust (REIT) based in Singapore, which would further add to its liquidity.