Malaysia's Sime Darby hit as second quarter profits drop 38%

Malaysia's Sime Darby Bhd, the world's biggest listed palm oil producer, Wednesday announced a 38 percent plunge in second-quarter profit due to weak commodity prices and China's slowdown.

The firm said net profit for the three months ended December 31 was 273.3 million ringgit ($64.6 million), compared to 437.4 million ringgit in the same quarter last year.

But Sime Darby, which is also involved in property and the industrial and hospital sectors, also said quarterly revenue rose 10.3 percent year-on-year to 11.83 billion ringgit.

Earnings in the plantation division suffered from lower palmoil prices and declining fresh fruit production, "coupled with a significantly more challenging business environment", Mohamad Bakke Salleh, president and group chief executive, said in a statement.

Sime Darby's shares dipped 4.02 percent to 7.64 ringgit.

Plunging prices of oil and other commodities have hurt Malaysia's growth prospects and government revenues.

The economy grew a slower than expected 4.5 percent year-on-year in the three months through December,after climbing 4.7 percent in the previous quarter.

The government now expects economic growth of 4-4.5 percent this year, down from an earlier projection of five percent.

For the first half of the financial year Sime Darby recorded a 601.7 million ringgit net profit, down 36 percent from the previous six months.

The multinational said it expects to face major challenges on the back of an economic slowdown, particularly in China.

"The mining sector downturn and slowing growth in China continue to significantly impact the industrial division while consumer-driven businesses remain tested by bearish sentiment," Mohamad Bakke said.

Malaysia and neighbouring Indonesia together account for 85 percent of global palm oil production.