SIME sets up another company in China

Sime Darby Bhd is expanding its position in China with the setting up of another company there recently called Sime Darby CEL Machinery (Xinjiang) Company Ltd (SDCEL). The conglomerate received the business licence in China on Tuesday.

According to its announcement on Bursa Malaysia yesterday, SDCEL’s entire capital of US$750,000 (RM2.43 million) will be held by Sime’s wholly owned subsidiary — The China Engineers (South China) Ltd.

Sime noted that the principal activities of SDCEL includes manufacturing and processing of engineering machinery, electricity generators sets, engines, agricultural machinery, special transportation machinery and relevant spare parts (including used equipment and used spare parts).

Analysts said this move fortified Sime’s strategy to venture into China further.

“The group has said that it wants a stronger presence in China. Sime is in the business of utilities, motor, heavy equipment and property in China.

“It also has plans to do downstream plantation operations there. For now though, Sime’s major contributors from China include its port and heavy machinery businesses,” said a local analyst who covers the stock.

For Sime’s financial year ended June 30, 2009, revenue from China of RM5.1 billion contributed 16% to the group’s total revenue for that financial year of RM31 billion.

The RM5.1 billion revenue from China in FY09 is an increase of 34% from the previous year.

Meanwhile, China contributed RM222 million to the segment results of Sime for FY09. This is a 7% contribution to the segment results of the group of RM3.3 billion.

Meanwhile in the statement to Bursa yesterday, Sime noted that the establishment of SDCEL was not expected to have a material effect on the earnings or net assets of the group for the year ending June 30, 2010.

Sime’s share price closed at RM8 yesterday, two sen lower than the previous trading day.


This article appeared in The Edge Financial Daily, July 1, 2010.