Sime Darby 1Q net profit drops 12% on lower contribution from motors division, higher finance costs

KUALA LUMPUR (Nov 24): Sime Darby Bhd saw its first-quarter (1Q) net profit decline 12% year-on-year, due to weakening consumer sentiment in China which impacted the motors division, higher finance costs and loss from discontinuing operations as it completed the sale of Weifang Port companies in China in November.

This was partly offset by higher profits from the Malaysian and Australasian operations.

Net profit for its first financial quarter ended Sept 30, 2022 (1QFY2023) fell to RM207 million, from RM236 million a year ago, although revenue grew 14.5% to RM12.18 billion in 1QFY2023 from RM10.63 billion in 1QFY2022.

In a Bursa Malaysia filing on Thursday (Nov 24), Sime Darby said the automotive business was dragged down by China operations' lower margin during 1QFY2023.

"The group's motors operations in China continue to be affected by subdued consumer sentiment and the risk of Covid-19 restrictions. Supply chain disruptions have also impacted the availability of certain models.

"Incentives for the purchase or production of electric vehicles (EVs), ongoing development of EV charging infrastructure and increasing importance of sustainability and environmental concerns are expected to support demand for EVs going forward," it added.

Although the operating environment is expected to be more challenging in 2023, Sime Darby said it is cautiously optimistic that financial performance for FY2023 would be better driven by the expected one-off gains from disposal of non-core assets.

"FY2023 is expected to be a challenging year. However, we are confident that we will weather the storm," said group chief executive officer Datuk Jeffri Salim Davidson in a separate statement.

"Looking at positive prospects ahead, for motors, we will continue delivering the backlog of orders in Malaysia until the third quarter of FY23. We have also recently secured the BYD distributorship for Malaysia, which promises to bring a lot of excitement to the Malaysian market," he added.

For the group's industrial division, Jeffri said products and services supporting the mining sector are expected to perform well in FY2023 with the backlog of maintenance work coming in and bullish commodity prices supporting continued investment in the resources sector.

"Sime Darby remains committed to enhancing the efficiency of our operations as we carry on with our expansion plans.

"We will continue to invest to grow our sales network for both the motors and industrial businesses as well as actively exploring merger and acquisition opportunities to extend our core businesses' reach," he said.

As of 3.29pm, Sime Darby's share price was up six sen or 2.74% at RM2.25, giving it a market capitalisation of RM15.32 billion.