Published May 26, 2009

Sime Darby Q3 profit slumps 85% to RM165.7m

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(KUALA LUMPUR) Sime Darby, Malaysia's top oil palm grower by market value, said quarterly net profit slumped 85 per cent as palm oil prices more than halved from last year's record highs.

Chief executive Ahmad Zubir Murshid said yesterday that Sime Darby would use its balance sheet to acquire undervalued assets, but did not elaborate.

The company said its industrial and property divisions were recovering, but its plantation business faltered due to the drop in crude palm prices and lower production as a result of biological tree stress. The slump in third-quarter net profit was the company's second consecutive fall, while rival Wilmar International, less exposed to weaker crude palm oil prices, had posted higher earnings.

Sime Darby, valued at about US$11.8 billion, said January-March net profit fell to RM165.68 million (S$68.6 million) from RM1.11 billion a year earlier. Local analysts do not provide quarterly forecasts, but had expected Sime Darby to earn RM2.2 billion for the year to end-June, down from RM3.57 billion a year earlier. Nine-month net was RM1.3 billion.

Crude palm oil (CPO), a key ingredient in food processing and widely used as a cooking oil, hit a record RM4,486 a tonne in March 2008 before collapsing at the height of the global financial crisis. Prices have rebounded strongly this year, but are still down more than 40 per cent from last year's peak.

CPO futures on the Malaysian derivatives exchange are currently traded at around RM2,460 a tonne. Sime Darby's average CPO price from its Malaysian and Indonesian estates as of end-March were pegged at RM2,127 a tonne.

Malaysian palm oil firms are more vulnerable to falling CPO prices than Singapore rivals as they are mostly operating in the upstream industries that supply palm oil to refineries.

IOI Corp, Malaysia's No 2 palm oil producer, said its January-March net profit slumped 97 per cent on the fall in prices, weaker output and foreign currency losses. -- Reuters