Sime Darby to Triple Capital Expenditure to RM7 Billion

Sime Darby to Triple Capital Expenditure to RM7 Billion

PETALING JAYA: Sime Darby Bhd, which reported a better-than-expected profit for the financial year ended June 30, 2009 (FY09), plans to more than triple its capital expenditure (capex) to RM7bil in the current financial year on “aggressive” business expansion, especially for its plantation operations.

“We will be aggressive as we can’t just stand still. We will continue to improve our operations and this is the right moment to invest due to the market conditions,” Sime Darby president and group chief executive Datuk Seri Ahmad Zubir Murshid told a press conference at the company’s results briefing.

Sime Darby’s capex for FY09 was RM2bil, according to Zubir. For the fourth quarter, the net profit of the world’s largest listed planter slipped 4% to RM984mil while revenue shed 17% to RM7.5bil against a year earlier as the production and prices of crude palm oil (CPO) fell.

Although its net profit for the full year fell 35% to RM2.3bil compared to fiscal 2008, it exceeded the group’s target of RM1.9bil by 20%, the company said.

Full-year revenue dropped 9% to RM31bil.

The group proposed a final dividend of 15.3 sen per share for FY09.

Zubir said the plantation segment would have the biggest slice of the expanded capex. “We (plan) to expand our downstream and mid-stream business. We also plan to open our refinery and expand our upstream activities,” he said.

“We put it into three stages when we started the merger. The first stage is to maximise the synergy value for the merger and stage two is to expand, which we are in now,” he added, referring to the merger of the company with two other plantation giants, Golden Hope Plantations and Kumpulan Guthrie.

Sime Darby is also planning to raise RM4.5bil through Islamic instruments.

“We are in the process now (of raising funding) and we are looking at all possibilities to utilise our proceeds which include refinancing our existing bonds and raise funds for our capex,” he said. Asked about a separate listing for its plantation business, Zubir said there were no such plans in the near future. “The reason for us to merge the three companies is to make sure that we have the synergy value. We believe that we are able to realise the full synergy value by next year,” he said.

On its FY09 financial results, he said all the group’s divisions had performed better than the previous year with the exception of plantation.

“The drop in plantation business was basically due to the lower crude palm oil price (CPO) as well as slightly lower production as a result of biological tree stress and unfavourable weather conditions,” he said. “We hope to do better than the last financial year if CPO prices (turn) better.”

The group’s industrial, property and motors divisions are expected to perform better in the current financial year, according to Zubir.

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