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Sime Darby says FY2011 profit will beat forecast
KUALA LUMPUR - Malaysia's Sime Darby, the world's top planter by landbank size, said it expects to beat its targets for this financial year due to strong crude palm prices, better contributions from other divisions and a plan to cut non-core assets.
Sime made a commitment last year to cut non-core assets after suffering two consecutive quarters of losses owing to losses at its energy division.
As a part of its reorganisation, Sime said on Friday it has signed a memorandum of understanding to sell its oil and gas-related fabrication yards for RM695 million (US$228 million) to state oil company Petronas.
The company was also on track to exceed its announced financial targets for 2011 thanks to higher crude palm oil (CPO) prices and better performance from its industrial and motors divisions.
CPO prices surged to levels not seen since 2008 in the first three months of the year, but have moderated due to uncertainty over the global economic recovery.
Sime reported a net profit of RM820.1 million during the third quarter ending in March, compared to a net loss of RM308.6 million for the same period a year ago.
Results in the year-ago quarter were hit by cost overruns totalling US$656 million at Sime's energy unit, which led to intense investor scrutiny and a number of ongoing legal suits. 'This marked improvement in performance was achieved despite difficult operating conditions,' Sime's chief executive, Bakke Salleh, said in a statement, adding that the company has completed a review of its businesses and was finalising plans for a restructuring.
Sime said the average realised CPO price for the January-March period was RM3,142 per metric tonne, compared to RM2,835 for the prior quarter.
Despite the higher price, poor weather conditions affected the palm harvest resulting in a quarterly decline in profit for its plantations division, which still accounted for 51 per cent of its third quarter pre-tax profits.
The plantation division also made a small impairment of its biodiesel assets totalling RM82 million.
A recently signed Indonesian moratorium on logging could also dampen Sime's planting efforts in South-east Asia's most populous country, although the government has eased the impact by revealing a list of exemptions. Sime's Q3 net profit was also driven by improvements from its industrial and motors divisions, which posted a nine-month growth of 30 per cent and 90 per cent respectively.
Sime's main business segments are plantation, property, industrial, motors, energy and utilities, and healthcare.
Analysts on average expect a full-year profit of RM3.26 billion for Sime. They do not generally provide quarterly estimates for Malaysian companies.
Eighteen of 28 analysts tracked by Thomson I/B/E/S have a 'buy' or 'strong buy' call on the stock.
Sime's shares have risen 3.8 per cent so far this year, while local rival IOI Corp shares have fallen 7.7 per cent and Singapore-based competitor Wilmar shares have fallen 4.0 per cent.
Source: REUTERS
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