Sime Darby sells vehicle distribution business in Australia, New Zealand
KUALA LUMPUR (Nikkei Markets) -- Malaysia's Sime Darby, the world's largest palm oil producer by acreage, Tuesday announced the sale of its vehicle distribution business in Australia and New Zealand, yet another step as the conglomerate restructures its sprawling operations.
The buyers, Inchcape Australia and Rick Armstrong Motor Group in New Zealand, will take over the business that distributes Peugeot, Citroen and DS vehicles in the two countries effective June 1. Apart from the brands under French car maker Groupe PSA, Sime Darby Motors also represents other names ranging from Nissan to Ferrari in the two markets.
Sime Darby said in a statement that the decision to divest the Australasian distribution businesses was reached after "careful consideration" and was in line with its strategy to "focus on the expansion of its retail car and commercial truck footprints on both sides of the Tasman."
Sime Darby Motors is involved in the retail, distribution and assembly businesses and has a presence in 10 countries across the Asia Pacific. The company represents 30 brands, ranging from luxury names such as BMW and Rolls-Royce to mass-market marques such as Hyundai.
Analysts said Tuesday's deal would allow Sime Darby to sharpen its focus in the competitive automotive business. The unit's profit before tax slumped 25% in the 2015 fiscal year that ended June 30 and rose less than 6% in the most recent fiscal year.
Sime Darby wants "a more focused business strategy that they are working on rather than be exposed to every part" of the automotive market, said CIMB Investment Bank Analyst Ivy Ng.
The contribution to Sime Darby from the PSA business in Australia and New Zealand is "very minimal," said Chye Wen Fei, an analyst at Hong Leong Investment Bank. "For a big entity like Sime Darby, it doesn't quite make sense to pay so much attention to a smaller one."
The Malaysian conglomerate is in the midst of restructuring its operations that range from plantations to healthcare. That could lead to the creation of three separate listed entities housing its plantation, property, and trading and logistics businesses.
Before announcing the restructuring in January, the company sold some industrial assets in Australia and properties in Singapore, as well as part of its stake in property developer Eastern & Oriental last year.
Sime Darby's mainstay plantation business accounted for more than a quarter of its total revenue of over $10 billion in the fiscal year 2016 while property development made up 7%. Those two businesses could be listed by the end of 2017 or in early 2018.
Shares of Sime Darby ended flat at 9.33 ringgit ($2.16) on Tuesday, in line with the benchmark FTSE Bursa Malaysia KLCI.
--Jason Ng and Alexander Winifred
--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.