BY IZWAN IDRIS

KUALA LUMPUR: Sime Darby Bhd has identified a potential buyer for the planned sale of its 14 industrial assets in Australia as the country’s biggest conglomerate steps up efforts to mitigate the impact of weak palm oil production and losses at its Malaysian motor division.

The properties up for sale are mainly the group’s heavy equipment facilities on the east coast of Australia which some reports have estimated at A$250mil (RM738mil).

The group also said yesterday that Blackstone Real Estate Partners Ltd is expected to acquire a majority interest of 75% in three Singapore properties owned by Sime Darby.

President and group chief executive Tan Sri Mohd Bakke Salleh is seeking to boost slacking profits to meet the group’s target of achieving RM2bil in earnings in the financial year ending June 30, 2016.

Sime Darby yesterday posted a net profit of RM663.4mil in the third quarter ended March 31, helped by a one-time gain of RM406mil from the deconsolidation of two properties in Singapore.

This lifted its nine-month net profit to RM1.27bil, barely two-thirds of its full-year target.

“The good news is the rain has started and (palm oil) yield has picked up,” Bakke said at a press conferenece yesterday to announce the group’s latest quarterly results.

Severe drought due to the super El Nino weather phenomenon saw fresh fruit bunch (FFB) production in Malaysia and Indonesia in the third quarter plunging 13% and 5% against the corresponding three-month period last year.

The slightly lower average crude palm oil (CPO) price realised of RM2,200 a tonne, compared with RM2,209 a year ago, pushed the division’s pre-tax profit down 32% to RM91.9mil in the third quarter.

The group, however, is likely to benefit from the higher price of CPO during the current quarter, with the benchmark CPO futures contract on Bursa Malaysia Derivatives being traded to a high of RM2,779 a tonne on March 29.

The contract was traded at RM2,544 a tonne yesterday.

Bakke expects the price of CPO to range between RM2,500 and RM2,700 a tonne over the next three months.

But palm oil production at Sime Darby’s worst affected estates in South Kalimantan and Sabah could cut its FFB production by between 8% and 9% in 2016.

Although the super El Nino has peaked, the ongoing tree stress is expected to last for a period of 15 months, according to Sime Darby Plantation division managing director Datuk Franki Anthony Dass.

“We prefer the La Nina,” he said.

The La Nina weather phenomenon, that generally follows El Nino, typically brings heavy rain.

Some experts are predicting that this coming La Nina event would increase the chances of big floods happening around the region, which could disrupt palm oil production.

Meanwhile, Sime Darby is also facing tough challenges in its automotive division.

Car sales between the January and March period fell 9% to 18,858 units mainly due to lower sales from the Malaysian operations. The Malaysia unit posted a loss of RM3.1mil during the quarter, which is its worst performance in 10 years.

The sale of assets under the group’s ongoing monetisation exercise, coupled with the first fund raising under the perpetual subordinated sukuk programme with proceeds of RM2.2bil in the third quarter had helped improve its liquidity profile.

Sime Darby’s total borrowings was reduced by RM3bil from RM19.6bil as of end-2015 to RM16.6bil as of end-March this year.

On the possible listing of its port business in China, Bakke said the Weifang Port operations would be ready for an initial public offering by 2020.

The immediate focus, he said, was to complete the ongoing expansion work at the port.