Highlight Sime Darby cuts capex by RM2b to RM4b for current FY

by **Cals** Fri 29 Nov 2013, 18:35

Highlight Sime Darby cuts capex by RM2b to RM4b for current FY

Business & Markets 2013

Written by Surin Murugiah and Jonathan Gan of theedgemalaysia.com

Friday, 29 November 2013 18:13

KUALA LUMPUR (Nov 29): Conglomerate Sime Darby Bhd is cutting down its capital expenditure (capex) to RM4 billion from RM6 billion for its current financial year ending June 30, 2014, said its president and chief executive officer Tan Sri Mohd Bakke Salleh today.

Speaking at a media briefing in conjunction with the release of the group’s financial results for the first quarter ended Sept 30, 2013 here today, Mohd Bakke cited the current performance and the external business environment to be the main factors in the reduction of the capex.

He said of the RM4 billion, the conglomerate would set aside 40% to 50% for the plantation division, 20% for its industrial division, 20% for property and about 10% for its motor division.

To a question on the possibility of demerging or the spinning off of any of its units, Mohd Bakke said Sime Darby was exploring merging its Indonesian operations with a company there or seeking listing of its Indonesian unit on the stock exchange in Jakarta.

Without giving details, he said Sime Darby was aiming to finalise either a merger or an initial public offering in Indonesia next year.

On crude palm oil (CPO) price estimates for the current year, Sime Darby’s chief financial officer Tong Poh Keow said the group expected prices to hover between RM2,350 and RM2,800 per tonne.

She said the CPO price drivers were the expected decrease in inventory level due to moderate production and higher biodiesel mandate.

Meanwhile, Mohd Bakke said the group’s planted areas had increased to 532,000ha from 525,000ha previously, explaining that its Liberian plantation partly contributed to the increase.

He also said Sime Darby was looking into expanding its land bank in the African continent and in Indonesia.

On the ratio of production, Mohd Bakke said 60% of its current production was from Malaysia and 40% from Indonesia, explaining that it was aiming to increase its Indonesian production.

On its headline key performance indicators for the 2013/2014 financial year target of RM2.8 billion net profit and 10% return on average shareholder funds, which was lower than the RM3.2 billion and 12% respectively for the 2012/2013 financial year, Mohd Bakke said “the shortfall could be covered barring external factors”.