Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on February 25, 2016.

 

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KUALA LUMPUR: Sime Darby Bhd, the world’s largest listed palm oil firm, is looking to raise RM1.8 billion in net proceeds via the monetisation of its assets overseas, in a bid to pare down its gearing level amid the challenging economic environment.

The conglomerate is expected to reap a gain of RM1.5 billion from the exercise, which is slated for completion next month.

Sime Darby executive chairman Tan Sri Mohd Bakke Salleh said it plans to monetise its commercial and industrial properties in Singapore and Australia.

“In Australia, we have 13 properties and in Singapore we have three. We hope to raise around RM1.8 billion.

“We are looking at disposing of office buildings and industrial properties in the two countries. We will do a sale and leaseback,” he said.

With the asset monetisation and its previously announced perpetual sukuk issuance to raise up to RM3 billion in place, Mohd Bakke said Sime Darby’s gearing will be reduced to 54% by the end of the financial year ending June 30, 2016 (FY16), from 61% currently.

Asked if the group is looking to do any cash call in the near term to further reduce its gearing level, he said Sime Darby has not yet considered any further plans.

On potential mergers and acquisitions, Mohd Bakke said it will look to maximise organic growth, that is, focusing on getting more out of its existing investments rather than actively pursuing new acquisitions.

On the group’s plans to list its automotive arm Sime Darby Motors, Mohd Bakke said the group has no initial public offering (IPO) plans in the current financial year. In February last year, Sime Darby put the listing plans on hold due to an unfavourable market environment.

“Considering the condition of the market today, no one really talks about IPOs. It’s a question that has been put on the back burner,” he said.

“For us, we are not even looking at doing an IPO, at least until the end of our [current] financial year,” he added.

For the second financial quarter ended Dec 31, 2015 (2QFY16), Sime Darby saw its net profit fall 38% to RM273.29 million from RM435.4 million in 2QFY15.

This was despite a 10% increase in revenue for the quarter to RM11.83 billion from RM10.74 billion in 2QFY15.

For the first half of FY16, net profit dropped 36% to RM601.7 million from RM938.1 million a year earlier, while revenue rose 5% to RM22 billion from RM20.87 billion.

The group declared an interim dividend of six sen per share for FY16, payable on May 6.

“We are halfway through the earnings reporting period and the numbers reflect the challenging business environment that the group operates in.

“Lower average crude palm oil prices realised and fresh fruit bunch production during the quarter under review, coupled with a significantly more challenging business environment, weighed down the earnings contribution of the plantation division,” said Mohd Bakke.

Moreover, he said, the industrial division had been impacted by a downturn in the mining sector and slowing growth in China, while the consumer-driven businesses continued to be affected by dampened sentiment.

In a filing with Bursa Malaysia yesterday, Sime Darby warned that against the backdrop of slower economic growth and a difficult operating environment, it expects the group’s performance for FY16 to be lower than that of the previous financial year.

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