PETALING JAYA: Sime Darby Bhd
will be focusing on growing its crucial automotive and industrial divisions.
This comes after the automotive giant’s bottom line was pulled by losses in its China operations.
It is also putting a stop to more acquisitions as it looks to “integrate” existing assets following its exit from the healthcare business.
It announced that its net profit for the financial year ended June 30, 2024 (FY24) more than doubled from the previous year.
The increase in bottom-line performance was mainly due to the realised gain of RM2bil from the disposal of Ramsay Sime Darby Health Care (RSDH) last December.
Excluding its one-off gain, the group reported a core net profit of RM1.3bil in FY24 which is a 14% year-on-year (y-o-y) improvement while revenue rose by 39% y-o-y to RM67.1bil.
The board declared a second interim dividend of 10 sen per share for the FY24 to be paid on Sept 30.
This brings the total dividend payout for FY24 to 13 sen a share or RM886mil.
The segments that drove its core profit were its industrial business in Australia, automotive businesses in Malaysia, Singapore and Taiwan as well as the maiden profit contribution from the UMW division.
“The group is focused on growing its core businesses in the automotive and industrial divisions following the divestment of RSDH.
“We have done three big acquisitions last year and it is time to digest these. What we want to do now is to focus on the integration to ensure the financial results are strong and that they meet our investment case. “So far, they are doing very well and this will be the focus rather than pursuing more merger and acquisition,” said group chief executive officer Datuk Jeffri Salim Davidson at a press briefing to announce its results yesterday.
Group chief financial officer Muhammad Noor Abd Aziz said the divestment would allow the group to focus on its core divisions.In its fourth quarter, net profit fell by 85.7% y-o-y to RM89mil on the back of quarterly revenues rising by 41.4% to RM18.8bil y-o-y.
The group said its net profit from continuing operations was lower by 86.5% at RM83mil, mainly due to one-off impairments and provisions at the automotive division, losses at the China automotive operations, higher finance costs and deferred tax provisions.
“We are not considering an exit from the automotive business in China. We are a long-term player there and have been there for decades.
“It may be a bit slow to come out of the trough. The heavy price discounting of vehicles that we saw in May and June last year is easing a little,” Jeffri said.
“The manufacturers are becoming sensible in not pushing volumes too much, which puts pressure on profit margins.
“There is a gradual realisation there as the China government manages the manufacturers so that they don’t keep producing cars which they can’t sell.
“The country is managing the supply-side but it is still a long way before we can go back to our glory days (in China), which was about three years ago,” he pointed out.
Amid the challenging conditions in China, its automotive division undertook a strategic review of its operations and as a result, made impairments of RM229mil during the quarter.
Excluding the one-off items, the automotive division’s profits before interest and taxes decreased by 36.7%, weighed by the losses at the division’s China operations, it said.
Meanwhile, the group said the next big step of integrating the UMW business division would be to move its headquarters to Menara Sime Darby, which is targeted for end-March 2025.
“We are going into the ninth month of integrating UMW into the larger group. The other processes such as finance and information technology are being integrated well.
“The focus would be to ensure all the businesses run smoothly for Toyota and Perodua,” UMW division managing director Mustamir Mohamad said.
Moving forward, Jeffri said the industrial segment might still experience softness but the mining business is positive for FY25.
“There is also still some growth here as mining companies are buying equipment,” he said.
However, there could be margin pressures for the automotive sector in Malaysia amid the sustained strong total industry volumes although Perusahaan Otomobil Kedua Sdn Bhd is expected to maintain its strength.
On the proposed fuel subsidy rationalisation for RON95, Jeffri said there could be a slight dip in sales, adding that this would recover eventually.
“When diesel subsidies were rationalised, there was a wait-and-see attitude among buyers. But four-wheelers are the workhorses for the construction industry and the small and medium enterprises,” Muhammad Noor said.
