Sime Darby 2Q net proft up 54% to RM428m

KUALA LUMPUR: SIME DARBY BHD []'s net profit rose 54% to RM428.19 million in the second quarter ended Dec 31, 2009 from RM278.50 million a year ago, but it was lower than the first quarter as it was affected by a decline in revenue from the oil & gas and engineering business unit.

It said on Thursday, Feb 25 revenue rose 15.5% to RM8.43 billion from RM7.29 billion. Earnings per share were 7.13 sen versus 4.63 sen.

It said 2Q profit before tax of RM783.15 million fell 20% from 1Q mainly due to the loss from energy and utilities and higher corporate expenses and finance costs which negated the higher returns from property and motors.

"Whilst the realised average CPO price for the quarter at RM2,199 per tonne was lower as compared to RM2,245 per tonne achieved in the preceding quarter, PLANTATION []'s contribution was marginally higher, due mainly to the better performance from the downstream operations and the higher CPO sales volume," it said.

Property contribution rose 103% due mainly to the gain of RM37.5 million on disposal of a subsidiary in 2Q and the higher contribution from Bukit Jelutong, Putra Heights, Nilai Impian and USJ Heights townships.

Higher sales in China for infrastructure projects helped lift the industrial division despite lower sales of new equipment from New Caledonia and Papua New Guinea operations.

As for the motors division, its profit rose 32% from 1Q mainly due to the gain on disposal of a property and dividend income received. However, energy & utilities recorded a loss due to higher off-shore costs on engineering projects.

Earnings from healthcare & others fell 20% due mainly to the gain of RM3.8 million in 1Q after the disposal of an associate. Corporate expenses was higher in the current quarter due mainly to the exchange losses of RM2.2 million compared to 1Q's exchange gains of RM17.1 million.

For the 1H, net profit rose 2.8% to RM1.112 billion from RM1.145 billion in the previous corresponding period. Revenue was slightly higher at RM16.169 billion compared with RM12 billion. Pre-tax profit was RM1.765 billion compared with RM1.648 billion.

Sime Darby said the plantation division recorded an operating profit of RM1.3 billion in 1H, up 14%, on the back of an increase in the sales volume of crude palm oil (CPO) coupled with improvements in Indonesian operations. Indonesian yields rose to 10.5 tonnes per hectare from 8.3 tonnes ha while oil extraction rates increased to 23.1% from 22.4%.

Its property division reported revenue of RM676 million for 1H, up 19% from a year ago due to the recovery of the property market and the strong performance of its townships. Operating profit which includes gains from the disposal of a subsidiary company increased by 32% to RM179m from the same period last year.

The motors division reported a 37% increase in revenue to RM4.7 billion, in line with the current rebound in global economic conditions. Operating profit increased by 31% to RM148 million from the same period last year due to better results from operations in Singapore, New Zealand and Thailand.

While the industrial division's revenue was fairly stable at RM4.1 billion, operating profit fell by 15% to RM377 million from a year ago due to lower sales and margins in Australasia and Singapore. Lower sales were partly due to deferments in capital expenditure by customers last year in light of depressed economic conditions during that period.

Sime Darby said the energy & utilities division's revenue fell 35% due to a 44% decline in revenue from the oil & gas and engineering business unit.

"The division registered an operating loss of RM110 million attributable to cost escalation on fabrication and engineering projects as a result of higher off-shore costs," it said.

Sime Darby president & group chief executive Datuk Seri Ahmad Zubir Murshid the plantation, property and motors divisions reported significant improvements in the 1H.

He noted that there were issues with the energy & utilities division, "We have faced several challenges with the O&G business unit especially with operational efficiency and project management.

Nevertheless, with a new management team on board, measures have been taken to increase operational efficiency and improve our project management capabilities, he said.