Sime Darby enroute to trimming gearing
Published on: Friday, November 27, 2015
Kuala Lumpur: Sime Darby is weighing several options to reduce its gross gearing ratio of 58-60 per cent, but has rejected the idea of disposing of its 30 per cent stake in Tesco. President and Chief Executive Officer Tan Sri Mohd Bakke Salleh said the board has several options to pare down borrowing. "We still aim to reduce the gearing to around 40 per cent and this can be done via several options.
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"The issuance of a perpetual Sukuk programme is a first step and work is underway to submit it to the regulatory body," he said at a press conference to announce the group's first quarter (Q1) results here Thursday. Sime Darby's pre-tax profit for the first quarter ended Sept 30, 2015 declined 30 per cent to RM471.0 million from RM674.9 million in the same period a year ago. The board Thursday approved a plan to undertake the establishment of a perpetual Sukuk programme of up to RM3.0 billion in nominal value to be used for refinancing and working capital. On other options, Mohd Bakke said the group could undertake rights issue to reduce debt level, or place it shares to targeted groups.
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"To strengthen Sime Darby's balance sheet, we can also monetise our assets, but the ultimate decision shall come from the shareholders. "We are blessed with marketable assets... with over 135,000 hectares of land, where 82,000 hectares are already planted with oil palm, additional land to be developed, and refineries... and plants," he said, but rejected disposing of Tesco as an option.
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The company presented its new key performance indicator target of RM2.0 billion as its net profit target for the financial year 2016, while return on average shareholders' equity target is 6.3 per cent, based on crude palm oil (CPO) price of RM2,250 per metric tonne. "We shall maintain our policy to pay out dividend based on 50 per cent of the net profit," he said. Mohd Bakke said the group would focus on implementing strategic cost-saving initiatives as its challenges in FY16 remain similar. He said should the US dollar fetch below the 4.0 level against the ringgit and the price of CPO improved, the situation would improve with a mark reduction in gearing. Stay up-to-date by following Daily Express’s Telegram channel.
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