Plantation, property units to declare payouts of 50% and 20% respectively

PETALING JAYA: Sime Darby Group, which is moving a step closer towards spinning off its plantation and property units, has unveiled the dividend policies for the businesses.

Sime Darby Plantation Bhd in its prospectus exposure has targeted for a dividend payout ratio of not less than 50% of its consolidated profit attributable to the owners of the company under the Malaysian Financial Reporting Standards (MFRS) beginning July 1, 2017.

In a separate prospectus exposure, Sime Darby Property Bhd said it is targeting a dividend payout ratio of not less than 20% of its consolidated profit attributable to the owners of the company under MFRS beginning July 1, 2017.

Sime Darby Plantation, which is en route to a listing on the Main Market of Bursa Malaysia by year-end, said it plans to pay dividends out of cash generated from its operations after setting aside necessary funding for capital expenditure (capex) and working capital requirements.

The company noted that its ability to pay dividends would be dependent on its profitability and financial condition, and would have regard to its working capital needs; capex plans; availability of cash to fund such dividends or other distributions; and the covenants in its existing loan agreements as well as other obligations.

Sime Darby Plantation is one of the pure-play entities to be created under the restructuring exercise of the group’s parent, Sime Darby.

The exercise by the conglomerate would see the demerger of Sime Darby Plantation and Sime Darby Property from the parent.

The idea is to streamline the group’s operations and create three “pure play” stand-alone listed entities in the forms of Sime Darby Plantation, Sime Darby Property and a leaner Sime Darby.

According to Sime Darby group president and chief executive officer Tan Sri Mohd Bakke Salleh, the listings of both Sime Darby Plantation and Sime Darby Property were targeted to take place by the end of November this year.

Sime Darby Plantation counts itself as the world’s largest oil palm plantation company by planted area, accounting for about 4% of total global production of crude palm oil (CPO) in 2016.

The group saw its net profit surge 2.6 times to RM3.81bil for the financial year ended June 30, 2017 (FY17), from RM1.46bil in the preceding year. Consequently, its earnings per share rose to 5.84 sen from 1.61 sen.

Sime Darby Plantation’s earnings for FY16 represented a decline of 3.7% from RM1.51bil, or 1.66 sen per share, in FY15.

The group’s pro-forma consolidated net asset per share stood at RM2.01 as at June 30, 2017.

Sime Darby Plantation recently implemented a five-year strategy, focusing on growing its upstream and downstream businesses, as well as maximising returns across the palm oil value chain by leveraging on its integrated business model.

For its upstream business, the group said: “We aim to continue our focus on operational excellence towards achieving ‘Mission 25:25’, that is, achieving FFB (fresh fruit bunch) yields of 25 tonnes per hectare and 25% OER (oil extraction rate) by 2025.”

Sime Darby Plantation owned 602,509 hectares of land planted with oil palm as at end-July 2017, while its CPO production stood at about 2.48 million tonnes for FY17.

As for its downstream, Sime Darby Plantation said it would focus on differentiated, sustainable and traceable high-value products to serve its customers’ evolving needs.

“We will also explore and expand opportunities to increase our presence in key geographical markets such as India, South-East Asia, the United States, Europe, Africa, the Middle East and China,” it said.

“We target downstream operations to contribute more than 20% of our group’s profit before interest and tax within the next five years,” it added.

To maximise returns across the palm oil value chain, Sime Darby Plantation has started restructuring a number of its upstream and downstream operation units to optimise mill utilisation rates and streamline sales and marketing activities.

“We also aim to achieve a more efficient palm oil supply chain and establish a better risk-management framework in order to create further value and improve our market share,” it said.

“We are also strengthening our supply chain network to take advantage of price spreads across locations and strengthen our ability to trade around our own assets,” it added.

Following Sime Darby Plantation’s listing, it would have 6.8 billion shares in issue, of which 3.2 billion, or about 47.1% of its issued share capital, would be collectively owned by Permodalan Nasional Bhd and Amanah Saham Bhd.

The Employees Provident Fund would own 688.8 million shares, or a 10.1% stake, while Kumpulan Wang Persaraan (Diperbadankan) would own 399.6 million shares, or a 5.9% stake, in Sime Darby Plantation. The remaining 2.5 billion shares, or about 36.9% of its issued share capital, would be held by other investors.

Sime Darby Plantation will not receive any proceeds from its listing, as there was no offer for subscription or purchase of its shares.