KUALA LUMPUR: Sime Darby Bhd is considering embarking on merger and acquisition (M&A) in the financial year ending June 30, 2021 (FY21) if opportunities arise amid the challenging market conditions, its chief said.
Group chief executive officer Datuk Seri Jeffri Salim Davidson also said the conglomerate's diverse and broad geographical footprint had mitigated the impact of Covid-19.
"We have the ability to gear up to do an acquisition. We are looking at various opportunities, particularly in the motors and industrial space. However, the current situation makes it difficult to predict as the Covid-19 pandemic is still at large," he said at Sime Darby's full-year results briefing here yesterday.
Jeffri said its cash reserve of RM1.7 billion and a relatively low gearing ratio of 0.26 times or RM4.0 billion debt, allowed Sime Darby to borrow more to fund the possible acquisitions.
"We have our cash reserve to tap into and the option to borrow for a potential acquisition," he said.
He said with businesses seemed to be picking up but with the Covid-19 cases on the rise in Australia and still around in Malaysia, it really dependent on how things panned out.
"Asia generally has been handling it quite well. We believe growth momentum should be better next year. We need to manage cost, balance sheet, inventories and focus on return to continue growing," he said.
Jeffri said the company's business would remain strong in Australia in supplying CAT heavy equipments to coal mine (metallurgical coal) for steel industry in China and Japan.
"China had announced about 1 trillion yuan package for infrastructure. If China continues to build, demand for steel and coal will be positive and fairly solid. Hopefully, they will use our machines and it should be fairly positive for us," he said.
Jeffri said Sime Darby would also continue to divest its non-core assets in FY21, depending on the timing and assets.
"We have 9,000 acres of land in Labu, Negri Sembilan, as well as insurance broking, logistic business and an 11 per cent stake in Eastern & Oriental Bhd," he said.
Group chief financial officer Mustamir Mohamad said it would allocate over RM500 million capital expenditure this year, mainly for the motors division's refurbishment of showrooms and new outlets.
Sime Darby's net profit eased 3.8 per cent to RM177 million in the fourth quarter (Q4) from RM184 million recorded in the same period a year ago.
In an exchange filing today, the conglomerate said this was mainly dragged due to disruption in its motors division and impairment on assets.
Its Q4 revenue dropped 5.36 per cent to RM8.82 billion from RM9.32 billion, impacted by the Covid-19 pandemic in operating countries, primarily in Southeast Asia due to lockdown.
For the full year, Sime Darby's net profit was 13.5 per cent lower to RM820 million from RM948 million.
This was due to the challenging market conditions brought by the Covid-19 outbreak between January to June this year.
Its revenue increased 2.1 per cent to RM36.93 billion from RM36.17 billion on the back of strong performance of its industrial division in key markets such as Australia and robust motors operations in China between July and December 2019.