By Xavier Kong
Sime Darby Bhd says its automotive division is still seeing strong demand in the luxury segment, though the shadow of Covid-19 looms.
“Without Covid-19, I would have been confident of the group’s prospects. However, as it stands, we do not know how long or how bad it is going to be,” its group CEO Datuk Jeffri Salim Davidson said at a media briefing on Feb 26.
There was also no indication of price increases in the automotive segment, according to Sime Darby Motors Sdn Bhd managing director Andrew Basham. He notes that there has been no indication of price increase from the manufacturers.
With regards to the National Automotive Policy 2020, Jeffri noted that it is a high level strategy, with details not here yet. However, he also shared that between 30% and 40% of Sime Darby Motor’s auto components are locally sourced, including the BMW engines which are built at the group’s premises in Kulim, Kedah.
Sime Darby Motors represents luxury brands such as BMW, Jaguar, Land Rover and Porsche as well as broad-appeal market brands including Ford and Hyundai. It is actively involved in all facets of the automotive business – from importation and assembly to distribution, retail and rental.
Sime Darby posted a lower net profit of RM282 mil in the second quarter ended Dec 31, 2019 compared with RM317 mil a year ago despite registering a higher revenue of RM10.21 bil versus RM9.42 bil.
The 11% decline in net profit was mainly due to recognition of a deferred tax credit of RM129 mil arising from the change in Real Property Gains Tax (RPGT) rates in Malaysia in the previous corresponding period.
Excluding this item, the group’s net profit would have increased by 50%, Sime Darby said in a filing with Bursa Malaysia today.
It said the industrial division recorded a 49.5% increase in net profit to RM287 mil in the quarter under review amid higher revenue from Australasia and China.
Meanwhile, the motor division saw profit rise 5.9% to RM143 mil supported by a significant increase in profits in China (including Hong Kong, Macau and Taiwan), mainly from improved margins and higher revenue at the BMW China operations.
This was largely offset by the weaker results in the Singapore operations as a result of lower margins.
In contrast, the logistics division’s profit decreased by 53.3% to RM7 mil as there was a share of loss from joint ventures of RM6 mil.
For the six months just ended, the company’s net profit declined to RM528 mil from RM542 mil a year ago while revenue was up at RM19.69 bil from RM18.27 bil.
“Our performance during the first half of FY2020 in Greater China, which includes Hong Kong, Macau and Taiwan, was up significantly year-on-year, with the industrial division’s regional operations expanding by 40% and the motors division’s Greater China business more than doubling profits,” said Jeffri in a statement.
“However, we are cautious about the prospects for the second half against the backdrop of the Covid-19 outbreak. Nevertheless, we are hopeful that the strong first half will help cushion the impact,” he added, noting that it is still too early to predict the full impact of the outbreak on the group’s operations, particularly for China and Singapore.
“We are actively managing the situation, with the safety and wellbeing of our employees, customers and visitors to our facilities being our top priority. We remain hopeful that the outbreak will be contained in the near future,” he added.
Looking forward, the group’s industrial division will be supported by the Australian side, where the demand for mining equipment remains “pretty strong,” according to Jeffri. – Feb 26, 2020.
