Sime Darby exits oil & gas business

The group will sell its oil and gas assets in Teluk Ramunia fabrication yard to Petronas for RM296 million and the Pasir Gudang fabrication yard to Malaysia Marine and Heavy Engineering for RM399 million.


Kuala Lumpur: Sime Darby Bhd is exiting the oil and gas business, selling the related assets to Petroliam Nasional Bhd and its recently-listed unit Malaysia Marine and Heavy Engineering Holdings Bhd for a combined RM695 million.

The country's oldest conglomerate had booked losses from the division in the previous financial year ended June 2010.

This is the second time in 12 years Sime Darby has exited a business, after getting its hand bitten.

In 1999, the group fully sold its banking business after Sime Bank Bhd (formerly United Malayan Banking Corp Bhd) had suffered RM1.57 billion losses.

Its then chairman had stated that Sime Darby should stick to what it knows best.

Yesterday, Sime Darby said that it is selling its oil and gas assets after more than 25 years being in the field.

The announcement comes almost a year after the group booked its first quarterly loss in more than a decade.

Last May, Sime Darby said its third quarter net loss stood at RM308.6 million, compared with a profit of RM150.6 million a year earlier.

The company booked a RM964 million provision in its energy and utilities division following cost overruns on projects in Qatar and the Bakun hydro-electric dam.

With the latest exit, Sime Darby's remaining core businesses are in plantations, properties, automotive, industrial, energy and utilities and healthcare.

Sime Darby president and chief executive officer Datuk Mohd Bakke Salleh said the group will sell its oil and gas assets in Teluk Ramunia fabrication yard in Johor to Petronas for RM296 million. Its Pasir Gudang fabrication yard also in Johor will be sold to Petronas unit Malaysia Marine and Heavy Engineering Holdings for RM399 million.

The RM695 million disposal will be paid in cash.

Sime Darby bought the Ramunia fabrication yard in May 2009 for RM232 million.

"The money will be reinvested as capital expenditure to grow Sime Darby's business inside and outside the country," Mohd Bakke told reporters yesterday after the group's annual general meeting.

He said Sime Darby has no plans to hive off its other operations but is continuously evaluationg all its business portfolios.

Meanwhile, Mohd Bakke said Sime Darby is confident of excee-ding its net profit target of RM2.5 billion in the year ending June 2011. This is buoyed by strong crude palm oil prices which are expected to stay above RM3,000 a tonne as well as its strong perfor-mance across all divisions.

"We should exceed the key performance indicator target by June and we are confident of coming up with a much higher number."

In the third quarter ended March, Sime Darby reported a net profit of RM820.1 million to reverse a net loss of RM308.6 million a year ago. Revenue increased to RM10.5 billion from RM7.5 billion.

The plantation, industrial and motor divisions contributed significantly to the group's results.

The motor division contributed 34 per cent to its growth, outshi-ning the plantation division which contributed 31 per cent.

Mohd Bakke said the company has no plans to list any of its units at the moment as it wanted to strengthen its core business to achieve further economies of scale.

On the company's plan to invest US$3.1 billion (RM9.36 billion) on its oil palm venture in Liberia until 2030, Mohd Bakke said Sime Darby has already invested RM50 million and is aiming for full planting by 2030.

He said Africa is a continent to watch out for due to its huge po-pulation and future potential.