KUALA LUMPUR: Sime Darby Bhd is upbeat on maintaining its robust growth in industrial and motor divisions for the financial year, ending June 30, 2018 (FY18).
Group chief executive officer Jeffri Salim Davidson said the multinational company would focus on expanding its core businesses, driven by encouraging performances in the previous quarters.
He said the industrial and motors divisions primarily will be spurred by healthy mining activity in Australia and launches of new BMW models.
Sime Darby posted a 37.29 per cent increase in net profit to RM1.62 billion in the first six months ended Dec 31 2017.
This was fuelled by its industrial segment on the gain of properties disposal, higher equipment deliveries and sales to the construction and mining sectors.
The group’s first-half revenue rose 12.92 per cent to RM16.96 billion from RM15.02 billion.
Its net profit in the second quarter, however, plunged 53.29 per cent to RM305.00 million from RM653.00 million a year ago due to lower contribution in motors division dragged by exiting cost from the BMW business in Vietnam.
The quarterly revenue increased nine per cent to RM8.82 billion from RM8.09 billion.
The group declared an interim single tier dividend of two sen per share for the year ending, June 30, 2018, payable on May 4.
Jeffri said the group’s industrial and motors divisions primarily will be spurred by healthy mining activity in Australia and launches of new BMW models.
The industrial sector is mainly involved in sales and rental as well as parts and maintenance services of the Caterpillar and other machinery products.
“We believe these businesses will continue to generate significant revenue for the company. However, other sectors like logistics and healthcare growth are expected to be moderate,” he said at a press conference in Kuala Lumpur, today.
He said for the logistics division, the group is looking at options to monetise Weifang Sime Darby Port Co Ltd in Shandong, China.
“However, we are not in talks with any parties,” he added.
Over the years, Sime Darby invested RM2.4 billion for its logistic business in China comprising three river port and a water treatment plant.
On the motor division, Jeffri said it would start producing BMW engines next month at its Inokom plant in Kulim, Kedah.
“The new plant is located within our existing facility. The new engine plant would have a production capacity of producing up to 10,000 engines annually for both local and export markets,” he said, adding that BMW business contribute between 60 per cent and 70 per cent to its motors division.
Sime Darby's unit Sime Darby Motors Sdn Bhd owns 49 per cent stake in BMW Malaysia Sdn Bhd, while the remaining is being held by BMW AG.
“We are counting on new products (cars) to boost sales. Usually, the new car launch will be a completely built unit (CBU), before deciding to come up with the completely knocked down unit (CKD) model,” he said,
noting that new products launches will reduce margin compression.
On its supermarket business Tesco, Jeffri said the business had been making losses for the last four years. It bought a 30 per cent stake in Tesco about 20 years ago.
“We are looking at all recovery options to retain growth momentum. The supermarket is cyclical business. Currently, we don't have any plans to dispose it,” he added.