From left: Sime Darby Plantation chief operating officer of upstream Mohamad Helmy Othman Basha, Sime Darby Plantation CEO Tan Sri Mohd Bakke Salleh and Sime Darby Plantation chief operating officer of downstream Mohd Haris Mohd Arshad at the group's 1QFY19 financial results media briefing here today. Photo by Kenny Yap/The Edge
KUALA LUMPUR (MAY 31): Sime Darby Plantation Bhd (SD Plantation) is targeting to expand its downstream business, wanting it to contribute 20% of the group's profit by 2023. It is a move to strike a balance of 50:50 contribution ratio between upstream and downstream segment in the future.
The downstream segment contributed about 10% to 15% of SD Plantation's profit in the previous financial year ended Dec 31, 2019 (FY18).
The increase in profit contribution, SD Plantation chief operating officer for downstream Mohd Haris Mohd Arshad said, will be driven by a combination of organic and inorganic growth.
He explained that the organic growth comprises efforts to improve its existing activities by enhancing efficiency and production capacity as well as expanding its footprint in food product ventures.
For the inorganic growth, which Haris referred to as the second phase of the plan, SD Plantation will look at potential tie-ups, joint ventures, as well as mergers and acquisitions to explore further opportunities in the downstream business.
Executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh, who is retiring from his post next month, said the group intends to recalibrate the breakdown of its profit contribution in order to lessen the dependence on the upstream business because it is the segment that is exposed to volatility of commodity prices.
Crude palm oil is expected to sustain its low price level in the near future, and SD Plantation forecasts that it will be traded between the range of RM2,000/MT and RM2,250/MT throughout the second half of the year.