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PETALING JAYA (Aug 27): Sime Darby Bhd (KL:SIME) is looking to shutter some of its unprofitable motor division branches in China as part of a strategic review, amid significant margin compression in its operations in the country.
However, group chief executive officer Datuk Jeffri Salim Davidson assured that the company is not exiting the market, as Sime Darby is a "long-term player" and that the Chinese economy is just going through a "trough" at the moment.
"You will notice we made a bit of a provision in June and a lot of it is around a big review of our China operations.
"We are looking at each and every operation and really taking a view that we will be shutting down some branches which are not profitable or we think that it is going to be a long way for profitability in view of the situation," he told reporters at a media briefing on Tuesday.
Sime Darby's motor division in China recorded a loss of RM123 million in the financial year ended June 30, 2024 (FY2024), dragging the division's profit before interest and tax (PBIT) to RM584 million, down 44.5% from RM1.05 billion in the previous year. Sime Darby attributed the loss in its China automotive operations to aggressive price competition, which adversely impacted its vehicle margins.
In contrast, Sime Darby's motor division in Malaysia reported a 34.7% jump in PBIT to RM613 million, while PBIT in Singapore (and others) almost doubled to RM140 million.
Sime Darby's wholly-owned subsidiary Sime Darby Motors entered the Chinese market over 50 years ago by becoming the sole importer and distributor of BMW cars and motorcycles in Hong Kong and Macau in 1972.
Through the years, it has expanded its brand network to include other luxury marques such as Rolls Royce, Lamborghini and McLaren. It has also expanded its dealer network in China and has more than 40 stores across the country, covering major cities such as Shenzhen, Beijing and Shanghai.
Shares of Sime Darby closed down 11 sen or 4.14% to RM2.55 on Tuesday, for a market capitalisation of RM17.38 billion.