Sime Darby probe widens

The following news stories are written by my boss Mustapha Kamil and colleague Zaidi Ismail.

KUALA LUMPUR: The ongoing internal probe by Sime Darby Bhd to find out how it made staggering losses has now been expanded to cover all its six business divisions.

The probe was previously confined to the conglomerate’s energy and utilities division. Sime Darby’s five other business units are the plantations, property, healthcare, automotive and industrial divisions.

Chairman Tun Musa Hitam said the management and external professionals were now putting the conglomerate under the microscope to weed out any weaknesses before coming up with any short-term and long-term restructuring efforts.

“Work is in progress at Sime Darby. We are being transparent and very serious about it. Let the process of democracy work. I would like to assure the ordinary people, who are majority shareholders of Sime Darby, that nothing will be swept under the carpet. The timeline for this probe is as soon as possible,” Musa said here yesterday after closing the World Islamic Economic Forum, of which he is chairman.

The government-linked company announced last week that it would have to book massive losses suffered in projects in the Middle East as well as the Bakun hydroelectric dam project in Sarawak. Sime Darby is expected to book close to RM1 billion in losses in its third-quarter results, expected to be released next Thursday.

Last week, Sime Darby also ordered its group chief executive Datuk Seri Ahmad Zubir Murshid to take leave of absence. It has appointed Datuk Azhar Abdul Hamid as acting group CEO.

The government has assured transparency in any investigation conducted on the company. Musa said the internal probe might take some time due to the group’s sheer size of more than 100,000 workers and presence in 20 countries.

On calls for him to step down, Musa said he and the entire board would do so only after going through due process and then found guilty.

“To ask me to step down in two or three days is not fair. There is a due process and methodology for me and the board to first go through. To step down, you must first have the basis to do so. Nobody can ask us to step down except for the shareholders.”

Sime likely to miss RM2.5b net profit target

Sime Darby Bhd is facing the possibility of missing its key performance indicator target of RM2.5 billion net profit for financial year 2010 as it prepares to book in almost RM1 billion losses in its third quarter results.

The conglomerate will include losses from ventures in the Middle East as well as the Bakun hydroelectric dam project in the third quarter numbers it will report on May 27.

A poll of 15 research houses came up with a net profit forecast averaging RM2.12 billion for the financial year, taking into consideration the losses. Sime reported net profit of RM2.28 billion in 2009 and RM3.51 billion in 2008.

The net profit forecast for financial year 2010 ranged from as low as RM1.58 billion to as high as RM3.1 billion. Analysts said that many of the forecasts in the higher ranges were arrived at on the assumption of crude palm oil prices remaining high for the rest of the company's fiscal year.

While Sime Darby conducts a wide range of businesses that include property development, engineering, automotive and healthcare, its plantation division has always been the jewel in the crown. An internal probe at Sime Darby is ongoing to determine the real extent of the losses, and it is understood that the probe could be extended beyond its problematic energy and utilities division.

Amid the probe, there were more calls from outside for Sime Darby to look also at its current business structure and company executives did not discount the possibility of the group shedding some of its fat later.

The Sime Darby of today was the result of a merger between the then Sime Darby Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd in November 2007. The merger had its critics, but its proponents argued that the exercise was to create economies of scale.

The Minority Shareholder Watchdog Group issued a statement yesterday, saying it was common knowledge that many investors bought Sime Darby shares mainly for its plantations business, which contributed to 70 per cent of the group net profit in 2009.

Prime Minister Datuk Seri Najib Razak said yesterday that Sime Darby should first find out why it had incurred the losses before any issue on responsibility was to be raised. "We need to investigate cause of the losses first. We can't do anything about the question of responsibility at this point in time," Najib said at a function in Kuala Lumpur.

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