SIME Darby Bhd still derives the bulk of its profit from its plantation division, despite being a diversified group, says OSK Research. “The group’s diversification did not help much in the current quarter, as its core profit dropped 24.8 percent compared to IOI Corp’s 15.9 per cent decline.It was also on par with KLK’s 24.6 per cent earnings dip,” said the research house. In a research note today, OSK highlighted that Sime Darby’s annualised first quarter core earnings were 10.6 per cent above its forecast and 6.2 per cent ahead of its Key Performance Index (KPI)net profit which was within consensus expectation. On Wednesday, Sime Darby in announcing its first quarter financial results, stated that profit contribution from the plantation division dropped by 35 per cent despite the 14 per cent higher sales volume.

The drop was primarily due to lower average crude palm oil (CPO) price of RM2,245 per tonne compared with RM2,962 per tonne in the previous corresponding period. Sime Darby also reported a lower pre-tax profit by 22 per cent to RM982.2 million for the first quarter ended Sept 30, 2009, compared to the RM1.253 billion in the previous corresponding period. For the quarter reviewed, it recorded a lower revenue of RM7.736 billion from RM8.705 billion previously. Meanwhile, Kenanga Research in its research note said, with better Crude Palm Oil (CPO) prices and production going forward, Sime Darby would comfortably surpass its KPI with a decent margin in the absence of any hiccups from its other divisions. “The first quarter 2010 net profit of RM684.6 million was 27.3 per cent and 25.1 per cent of ours and the street’s forecasts respectively,” said Kenanga. In another note, ECM Libra Investment Research said Sime Darby’s motor segment showed surprise growth while its industrial division was lower due to last year’s numbers being boosted by government stimulus spending in Australia and New Zealand. “The industrial segment was softer largely because of a slowing down in activity in Australasia,” the research house added. – Bernama Source : Business Times