PETALING JAYA: Sime Darby Bhd, which saw second-quarter (Q2) earnings drop by 37.53%, expects to gain RM1.8 billion by selling some 16 commercial and industrial properties, in a bid to reduce the group’s gearing level.
Speaking at a press conference after the group’s results briefing here yesterday, president and group CEO Tan Sri Mohd Bakke Salleh said 13 of the properties are in Australia, and the remaining three are in Singapore.
“We expect to complete it by the end of March. We will sell them and lease back,” he said, noting that the net proceeds from the disposal will be RM1.5 billion after deducting the investment cost.
The disposals, together with the Sukuk issuance of up to RM3.0 billion, will see Sime Darby’s gearing ratio decline to 54% by end-June 2016 from 61% as at end-December, 2015.
Sime Darby’s net profit slumped 37.52% to RM273.29 million for the second quarter ended Dec 31, 2015, compared with RM437.4 million in the previous corresponding period, due mainly to weak commodity prices and challenging economic conditions.
Revenue, however, rose 10.12% from RM10.74 billion to RM11.83 billion.
Sime Darby has proposed an interim dividend of 6 sen per share.
Its first-half net profit fell 35.86% from RM938.09 million to RM601.68 million on the back of a 5.44% increase in revenue from RM20.87 billion to RM22.0 billion.
Bakke said the group has no intention to tweak its full-year net profit target of RM2.0 billion as yet, despite a lacklustre first half.
“When we come to the third quarter, then will be a better position for us to come out with year-end figures. For now, we’re sticking to the net profit target of RM2 billion,” he noted.
Sime Darby’s plantation division posted a profit before interest and tax (PBIT) of RM148.4 million for Q2, a 45% drop compared with RM269.8 million in the same quarter a year ago.
However, the reduced earnings from the upstream segment were partially offset by a much stronger performance in the midstream and downstream operations which recorded a PBIT of RM68.5 million.
Commenting on the crude palm oil (CPO) price, Bakke said he expects it to be in the range of RM2,500 to RM2,700 a tonne between now and end-March.
CPO futures contract for May fell RM31 to RM2,520 a tonne yesterday.
On Sime Darby’s joint venture property redevelopment project at Battersea Power Station in London, England, Bakke said it will start contributing to the group’s bottom line from the second quarter of the next financial year.
Rightsizing has been one of the measures under Sime Darby’s aggressive cost management across all its business segments.
“We’ve been rationalising our headcounts since 2012, and this has been implemented in China, Australia and Singapore,” Bakke explained.
He said the group is looking to reduce the workforce for its industrial sector to 7,200 by end-June from 7,400 currently. This compares with 10,000 employees in 2012.