Lower Plantation Contribution Brings Down Sime's Q1 Profit

KUALA LUMPUR: Sime Darby Bhd’s net profit for the first quarterended Sept 30 dipped 21% to RM684.64mil from RM866.98mil in the previous corresponding period due to lower contribution from the group’s plantation division.

The plantation giant’s revenue fell 12% to RM7.74bil from RM8.71bil previously while basic earnings per share stood at 11.39 sen for the quarter under review.

Contribution from the plantation division dropped 35% despite a higher sales volume of 14%.

Datuk Seri Ahmad Zubir Murshid at a media conference announcing the company’s first quarter results Wednesday. Looking on is Sime Darby Bhd group chief financial officer Tong Poh Keow.

President and group chief executive Datuk Seri Ahmad Zubir Murshid said the fall in contribution of the division was due to lower average crude palm oil (CPO) prices.

“The plantation sector is price driven. Compared with the previous quarter, there was a difference of about RM700 per tonne,” he told a media briefing yesterday.

According to Zubir, the average price for CPO for the quarter was RM2,245 per tonne compared with RM2,962 in the same period last year.

On expected CPO prices going forward, he said: “We have budgeted between RM2,000 and RM2,200 per tonne. Currently the average price is RM2,400 per tonne. We’re very happy as long as it’s above RM2,200.

“We don’t know what will happen in the first half of 2010, but we reckon that our forecast of RM2,000 to RM2,200 is quite stable.”

Zubir said the plantation division accounted for 60% of the group’s profits.

The company was looking for a strategic partner to set up a refinery in India, he said. “It should be finalised by next year.”

He said Sime Darby was also setting up a refinery with an annual capacity of 600,000 tonnes in Kalimantan, Indonesia, with an investment cost of RM360mil. The refinery is expected to start operations in 2011 or 2012.

For the quarter under review, profit for its industrial division dropped 25% due to slower off-take for new equipment and power systems in Singapore and Australia.

Its motor division, however, recorded a 73% increase in profit due largely to better results from its operations in Malaysia, Singapore and New Zealand.

Its energy and utilities division, meanwhile, saw a 99% increase in profit mainly due to the non-recurrent “one-off contribution” incurred by Port Dickson Power Bhd in the period.

The energy and utilities division was also boosted by the contribution from a new power plant in Thailand which commenced operations in February 2009 and improved performance of its port operations in China.

On another note, Zubir said the company’s projected RM400mil savings by 2010 following its mega-merger (at the end of 2007) was on track. “Last year, our second year, we achieved more than RM290mil and next year, God willing, we should be able to touch RM400mil as promised,” he said.

Source : The Star by Eugene Mahalingam


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