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Sime Darby profit soars 60% but outlook weak
[KUALA LUMPUR] Malaysia's Sime Darby, the world's biggest listed palm-oil producer, on Wednesday announced a 60 per cent quarterly profit rise but warned of a tough outlook amid slow global demand and lower weather-reduced output.
In a statement, Chief Executive Mohamad Bakke Salleh attributed the improved year-on-year earnings to sales of certain assets. The company had said in February it was considering selling real estate in Australia and Singapore to reduce debt.
Net profit jumped to RM663.4 million (S$223.4 million) in January-March, the third quarter in the company's financial year, compared to 414.7 million ringgit in the corresponding quarter of last year.
Revenue rose 2.4 per cent to RM10.2 billion.
However, Sime Darby said it expects a weaker performance in the fiscal year ending June 30 compared to last year due to the global economic volatility and corresponding reduced demand.
Mohamad Bakke added that palm production also was affected by an extended stretch of hot and dry weather, blamed on the El Nino climatic phenomenon, which has beset Malaysia since last year.
"In the plantation division, the adverse weather ... has persistently hampered fresh fruit bunch production in the period under review," he said.
Sime Darby's earnings for the first nine months of the current financial year were 10.9 per cent off of last year's pace.
Malaysia and neighbouring Indonesia together account for 85 per cent of global production of palm oil, a key ingredient in many everyday goods, from biscuits to make-up.
Palm oil use has skyrocketed in recent years due to its versatility and cheap production, but demand has weakened due to the world economic sluggishness.
Malaysia's economy expanded in the first quarter at a 4.2 per cent rate, its slowest in more than six years, as the energy-exporting country grapples with weak oil and commodities prices.
Sime Darby's activities include plantations, property development, heavy equipment and motor vehicle distribution, and energy and utilities.