KUALA LUMPUR: Sime Darby Bhd’s net profit for the year ended June 2012 rose 13 per cent to RM4.2 billion from RM3.7 billion a year ago, thanks to strong performances in its car and heavy machinery divisions, said president and group chief executive officer Datuk Mohd Bakke Salleh.
The plantation business, which typically makes up more than half of the group’s annual profits, saw a slight dip.
In a briefing held here yesterday, Bakke said plantation net profit of RM3.2 billion was 2.3 per cent lower than the previous year because the group harvested less fresh fruit bunches.
Erratic weather conditions, alternating between drought and heavy rainfall, stressed the oil palm trees and this had led to lower yields. Sime harvested 9.8 million tonnes of palm fruits, 3.4 per cent lower than last year’s 10.1 million tonnes.
Interestingly, the group managed to sell its palm oil at RM2,925 per tonne, marginally higher than RM2,906 per tonne in the previous year. Oil extraction rate, however, was a little bit higher at 21.8 per cent compared with 21.4 per cent, previously.
Following Indonesia’s palm oil tax restructure in October 2011, Sime’s refinery business suffered RM62.3 million in losses. This has narrowed from the previous year’s RM74.6 million loss which included an impairment of RM114 million.
Sime’s heavy machinery division experienced brisk business when it sold more mining equipment in Australia. This division chalked up RM1.4 billion in pre-tax profit, 27 per cent higher than previously, as it included maiden contribution from the newly-acquired Bucyrus business.
The property division’s operating profit inched 2 per cent to RM467 million from RM456 million.
Meanwhile, the energy and utilities division operating profit climbed 36 per cent to RM335 million, thanks to recognition of the deferred revenue from its power plant in Malaysia. Its China seaport business enjoyed higher cargo handling throughput at Weifang Port.
The healthcare division’s operating profit maintained at RM26 million, as the high number of patients was moderated by the slower nursing education sector and start-up expenses for the new Ara Damansara hospital.
Sime’s other businesses posted RM68.8 million in profits, a welcome relief from last year’s RM42 million loss. The turnaround was attributed to higher contribution from Tesco and the insurance brokerage business, which included RM29.7 million profit from the impairment of an investment sale.
For the full-year ended June 2012, Bakke highlighted Sime’s RM4.2 billion net profit surpassed its key performance indicator of RM3.3 billion by 27 per cent.
“Return on average shareholders’ funds improved 16.6 per cent, surpassing our 13.3 per cent target. This is the second consecutive year we’ve exceeded our targets. We are well on track to realise the long-term targets outlined in our five-year strategy blueprint,” he added.
On the outlook for the current year ending June 2013, Bakke warned of challenging times as the group’s earnings are highly dependent on palm oil prices.
“Palm oil is trading at a significant discount of US$260 per tonne from soya. So, there’s still a lot of upside. But then again, there are also factors like the restructuring of Indonesian palm oil taxes that are pulling down prices,” he said.
On a positive note, Bakke is hopeful of the palm trees recovering from stress, enabling the group to harvest 10.4 million tonnes of fresh fruit bunches. This represents 6 per cent more than 9.8 million tonnes recorded in the year ended June 2012.
He then went on to say Sime is seeking to double its oil palm and rubber plantation landbank to surpass one million hectares by 2015. Currently, the group has planted 522,000ha of its 870,000 plantation landbank in Malaysia, Indonesia and Liberia.
“We’ve set aside RM7.75 billion as capital expenditure for the year ending June 2013. Of that total, about RM3 billion will go to our plantation business,” he said. “We remained focused on our growth trajectory and this includes expanding Sime’s plantation landbank in Indonesia and West Africa. We want to double up our unplanted landbank by 2015,” he said.
In Liberia, Sime holds a 63-year concession until 2072 to plant some 200,000ha with oil palms and 20,000ha with rubber. Last year, Sime Darby Plantation Cameroon Ltd (SDPCL) was established in Cameroon.