KUALA LUMPUR: Sime Darby Bhd is exiting the port business in China with the disposals of all its interests in joint venture (JV) companies operating three river ports in Jining in the Shandong province.
Sime Darby said in a statement today that its subsidiary Sime Darby Overseas (HK) Ltd had disposed its entire stake in three JV companies in China for 293.9 million renminbi (RM181.6 million) to Jining Port and Shipping Development Group Co Ltd (JPSDG).
Sime Darby Overseas signed equity transfer agreements to dispose of its entire 70 per cent stake in Yuejin, Longgong and Taiping ports in Jining to JPSDG.
"The agreements that we have entered into allow for a staggered exit from our investment in our three Jining Ports over three years and is very much in line with our strategy to divest non-core assets," said Sime Darby group chief executive officer Datuk Jeffri Salim Davidson in the statement.
Jeffri said Sime Darby had developed a "China Growth Strategy" with significant investment to grow its motors and industrial footprint in China, as well as developing the ports business in Shandong province.
"This strategy has been largely successful, and China now accounts for almost 40 per cent of the group's revenue. Nevertheless, with the demerger and our focus on our trading businesses, the ports business is no longer considered a core business of Sime Darby," he said.
Jefri said Sime Darby had invested a total of RM179.8 million in the Jining ports over the years, which had contributed RM87.1 million in dividends to the group.
"However, the operations are facing continued downward pressure on margins due to intense competition from neighbouring ports and additional costs. Given these factors that are impacting the inland port sector in China, we consider the disposal price reasonable," he added.
Jeffri said Sime Darby's disposal strategy fitted in with the exercise being undertaken by the Jining government to consolidate the fragmented river port industry there.
"So, it is a win-win situation for us and for the Jining government," he added.
State-owned enterprise Jining Energy Development Group Co Ltd, the parent company of JPSDG, has provided unconditional and irrevocable letters of guarantee for JPSDG's obligations.
These were also supported by bank guarantees provided by JPSDG.
The equity transfers to JPSDG are expected to be completed within one month.