KUALA LUMPUR (Aug 27): Sime Darby Bhd’s net profit dipped 3.8% to RM177 million for the fourth quarter ended June 30, 2020 (4QFY20) from RM184 million a year ago, largely due to the impairment of assets and the adverse impact of the coronavirus outbreak, with its motors division taking the brunt of it.
The group, which saw revenue decline 5.4% year-on-year to RM8.82 billion from RM9.32 billion, nevertheless declared a special one sen dividend and a seven sen second interim dividend — a total of eight sen per share — to be paid on Oct 30. This brings its full year payout to 10 sen per share, the same quantum as the year before.
According to the group's quarterly results filing today, its motors segment saw a 29.7% fall in profit to RM194 million as its operations in Malaysia, Singapore and New Zealand were all affected by movement restrictions, as well as weakened consumer sentiment.
Its industrial segment, however, was less affected with a 3.8% profit decline to RM204 million, mainly because it registered higher equipment sales in Australia and Greater China. In particular, it said its Greater China operations registered a 56.6% jump in profit as revenue rebounded strongly from the preceding quarter, while Australia was not significantly impacted by movement restrictions during the quarter.
Its logistics segment was also less of a drag during this quarter, as it narrowed its losses to RM101 million from RM113 million a year ago, on a lower share of loss from Weifang Port Services Co, and a disposal gain.
Its 'others' segment, meanwhile, registered a profit of RM26 million as opposed to a loss of RM2 million previously, following a net reversal of impairment of the group's investment in Eastern & Oriental Bhd (E&O) of RM4 million (previous corresponding quarter: loss of RM18 million), and a RM15 million income from the settlement of a legal case.
For the full year ended June 30, the group's net profit was down 13.5% y-o-y to RM820 million from RM948 million previously, despite revenue increasing 2.2% to RM36.93 billion from RM36.16 billion. The weaker net profit was mainly due to the recognition of a deferred tax credit of RM129 million arising from the change in Real Property Gains Tax rates in Malaysia in the previous financial year.
"We had a solid first half with both the industrial and motors divisions reporting very strong results. The movement restrictions from February to May severely disrupted our operations in the second half of the year but, fortunately, our businesses have seen a strong recovery in sales after movement restrictions were eased.
"The diversity of our operations, both in terms of the different market segments we serve and in terms of geography, worked to our advantage. Our Caterpillar distribution business in Australia performed particularly strongly and covered for the shortfall in other parts of the business affected by lockdowns.
"The resilient operating performance, together with our efforts to improve working capital, have resulted in a significant increase in the group’s operating cash flow from RM1.35 billion last year to RM3 billion this year. The strong operating cash flow and relatively low gearing ratio of 0.26x places the group in a good position to handle the uncertain times ahead,” said Sime Darby's group chief executive officer Datuk Jeffri Salim Davidson in a statement.
The group made impairments of over RM200 million for the year, mainly from Weifang Port Services Co, and its investment in E&O.
Still, in terms of net profit from its underlying business operations (core net profit), the group said it saw a 9.5% growth to RM1.04 billion for FY20, compared with RM950 million for the last financial year, as strong performance in the the industrial division in Australia and China, together with robust BMW sales performance in its motors division in China in the first half of the year, helped mitigate the impact of the pandemic and the impairments.
Sime Darby shares were trading one sen higher at RM2.19 at the time of writing, which gave it a market capitalisation of RM14.76 billion.
Edited by Tan Choe Choe