KUALA LUMPUR (Feb 16): Sime Darby Bhd said the group is still looking for merger and acquisition (M&A) opportunities to grow its businesses, especially with the economic recovery from the Covid-19 pandemic.

"We continue to look at opportunities in M&A to continue to grow our businesses in the two core businesses that we have: industrial and motors businesses," said the group's chief executive officer Datuk Jeffri Salim Davidson.

Jeffri, who was speaking at a virtual press conference on Wednesday (Feb 16), did not provide any further details on the matter.

In a corporate presentation last October, Sime Darby said its expansion for the financial year ending June 30, 2022 (FY22) would include "transformational" M&As. The growth strategy includes luxury car dealerships in China and expansion of the company's mining services in Australia.

Besides China and Australia, which account for 40% and 30% respectively of the group's revenue, the group said it was also seeking to enter into other markets like India and Indonesia.

Sime Darby's latest acquisition was done in July 2021, when it bought Salmon Earthmoving Holdings Pty Ltd, an Australian rental and maintenance services company that services the civil construction, agricultural and mining sectors.

At the press conference, Jeffri said Sime Darby expects its net profit for FY22 to be at at around the FY21 level after stripping out the RM272 million one-off gain realised from the divestment of the group's stake in Tesco Malaysia.

"We had a very good year last year and we are going to be close to achieving last year's results, which I think is still pretty good considering Covid-19 and the headwinds that we are [facing]," he said.

"I think we should be able to see the demand for luxury cars remaining quite strong. The other thing is the commodity prices, particularly met coal, are pretty strong. So that's going to drive demand for our products over the next six months," he added.

Despite supply chain disruption concerns due to the pandemic and chip shortages, Jeffri said the group should be able to secure enough volume of cars from its principals to sell.

Sime Darby's core net profit for the first half of FY22 was down 8.2% to RM581 million due to lower contribution from the industrial division, which was affected by overall industry volume contraction in China and weaker operating margin in Australasia. Six-month revenue was down 4.12% to RM21.2 billion from RM22.12 billion a year ago, the group's filing showed.

Taking into account the one-off gain from the Tesco Malaysia deal last year, Sime Darby's net profit shrank 36.43% to RM581 million from RM914 million a year ago.

For the second quarter ended Dec 31, 2021 (2QFY22), the core net profit was 4.4% lower at RM345 million, compared with RM361 million in the same quarter of the previous year, due largely to lower profits from the industrial division's China and Australasia operations. Revenue for the quarter fell 6.29% to RM10.54 billion from RM11.24 billion.

On a quarter-on-quarter basis, Sime Darby's net profit was, however, up 46.19% from RM236 million in 1QFY22 due to stronger results from the industrial and motor divisions, despite a 1.28% dip in revenue from RM10.67 billion.

The group declared a first interim dividend of four sen, compared with the six sen paid out in the previous year. The ex-date for the dividend is April 25 while the payment date is May 11.

Shares in Sime Darby closed down two sen or 0.88% to RM2.26, for a market capitalisation of RM15.39 billion.