UPDATE 1-Sime's quarterly profit lowest in 3 yrs; sees tough conditions

Fri Nov 29, 2013 2:57am EST

* Shares almost flat after Q1 profit tumbles 51 pct

* Volatile commodity prices, weakness in consumer sector to weigh

* Sime CEO says to continue to put in prudent cost controls (Adds details, share price move)

KUALA LUMPUR, Nov 29 (Reuters) - Malaysia's plantations-to-motoring conglomerate Sime Darby Bhd posted its weakest quarterly profit in more than three years, and signalled volatile commodity prices and weak demand will continue to overshadow its cost-cutting efforts.

The third largest listed industrial conglomerate in Asia has been curbing expenses to boost margins across its global empire of oil palm estates, motor showrooms, power plants and ports.

"The business environments in the markets in which Sime operates are expected to be difficult as they continue to be affected by volatile commodity prices, continued weakness in consumer sentiment and the inability to sustain growth," Sime said in its earnings statement on Friday.

Sime's profits in the first quarter ended September tumbled 51 percent to 489 million ringgit ($151.37 million) from a year ago, the company said in a statement, its lowest earnings since the quarter to June 2010.

The firm's product inventories are the second largest in Asia, as the uneven pace of the global economic recovery has curbed prices and demand growth for its key products, ranging from palm oil to luxury cars in China.

Shares in the company were up 0.1 percent after the profit announcement at 0705 GMT, in line with flat benchmark Kuala Lumpur stock index.

PLANTATIONS

The plantation division, the company's biggest earnings contributor, posted a sharp 62 percent slump in the first quarter on lower prices of the edible oil and weaker output.

In a sign that margins were improving as the company cut costs, its food processing segment swung to a profit from a loss in the same period last year although analysts say stronger demand would have boosted earnings further.

Sime Darby CEO Mohammad Bakke Salleh said in a statement that the plantations division still hit operational milestones with oil palm planting underway in Liberia and a new refinery in Indonesia.

He added that Sime Darby, which is the world's top oil palm planter by landbank size, would have to work harder to put in place prudent cost controls to address challenges in its five business divisions.

But Sime would also have to get through a huge inventory. According to the latest available figures, Sime's inventory stood at $3.4 billion, which is second in Asia to South Korea's energy to logistics conglomerate SK Holdings CO Ltd who holds $8.6 billion worth of stock. ($1 = 3.2305 Malaysian ringgit) (Reporting by Niluksi Koswanage, Additional reporting by Tripti Kalro in BANGALORE; Editing by Himani Sarkar)

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