Sime Darby Blames Palm Oil Slump for 36 Percent Slide in Profit

Sime (SIME) Darby Bhd., the world’s biggest listed palm-oil producer, reported a 36 percent drop in second- quarter profit as prices of the commodity slid last year.

Net income dropped to 708.5 million ringgit ($228 million), or 11.79 sen a share, in the three months ended Dec. 31 from 1.1 billion ringgit, or 18.32 sen, a year earlier, Sime said in a stock exchange filing today. The company proposed paying a lower interim dividend of 7 sen per share.

Palm oil lost 23 percent last year, the worst drop since the 2008 financial crisis, after stockpiles reached record levels in Malaysia as the European debt crisis and a slowdown in China’s growth curbed demand. Prices may decline further this year after Asian producers boosted acreage which will raise output and global oilseed supplies rose, Dorab Mistry, a Godrej International Ltd. director who’s traded the commodity for more than 30 years, told Bloomberg in comments published yesterday.

“We are confident of riding out the current challenging environment and reaping the benefits in the future when the global economy gets on the recovery path,” Chief Executive Officer Mohd Bakke Salleh said in the statement. “I am confident that we will be able to achieve the targets we have set for the full financial year.”

Sime shares fell 0.1 unchanged at 9.16 ringgit as of 2:35 p.m. in Kuala Lumpur today after the earnings announcement. The stock has dropped 3.8 percent this year, tracking a similar decline in the benchmark FTSE Bursa Malaysia KLCI Index.

Increased Output

Palm oil for May delivery rose as much as 0.8 percent to 2,439 ringgit a ton on the Malaysia Derivatives Exchange and was at 2,436 ringgit at the end of the morning session. Futures dropped to 2,217 ringgit on Dec. 13, the lowest level for the most-active contract since November 2009.

Diversified Sime, which is based in Kuala Lumpur and operates in more than 20 nations, received an average 2,207 ringgit a ton for palm oil in the quarter, compared with 2,804 ringgit a year earlier. Profit from plantations dropped 42 percent to 522 million ringgit due to lower prices and shipments of crude palm oil, even as production of fresh fruit bunches grew 12 percent, according to the filing.

The group’s industrial division posted a 4.3 percent drop in profit to 285 million ringgit on weaker market conditions in Malaysia and Singapore. Earnings from property slumped 54 percent and contributions from energy and utilities dropped by 57 percent from a year earlier, the company said.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Jason Rogers in Singapore at jrogers73@bloomberg.net

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