Within a mere 20 days of being in office, Sime Darby’s new chief executive Datuk Mohd Bakke Salleh has been actively carrying out a “kitchen sinking” exercise in the group to ensure that all cost overruns and questionable claims are provided for in the group’s fourth quarter results, reliable sources said.
“Since coming in, Bakke has been digging into the books, scouring the group’s past dealings.
“You would only expect him to do so.
“New CEOs tend to kitchen-sink to start from a clean slate,” said a source familiar with the workings of the group.
Sime Darby has yet to respond to queries from StarBizWeek on this.
Bakke was appointed as acting president and group chief executive on July 15, replacing Datuk Seri Ahmad Zubir Murshid, who had earlier been asked to take a leave of absence in relation to losses stemming from Sime Darby’s engineering and utilities (E&U) division.
Sources said that there were likely to be provisions to the tune of at least a RM100mil coming from projects already provided for or from a newly secured Indian project.
It is understood that in January this year, Sime Darby, together with Singapore-based Swiber Holdings Ltd, had won a contract to build offshore platforms for Oil & Natural Gas Corp in India.
The deals cover engineering, procurement, construction, installation and commissioning work.
Work has commenced and is expected to be completed by the second quarter of 2011.
It is possible that Sime Darby had under-bid for their portion of this contract, not unlike what it is believed to have done in the other E&U projects for which it has provided for.
To recap, Sime Darby had taken a hit of RM964mil in its third quarter ended March 31, due to losses from its energy division.
The projects involved are the Bulhanine and Maydan Mahzam installation project with Qatar Petroleum, the Maersk Oil Qatar (MOQ) project, the building of vessels for the MOQ project and the Bakun hydroelectric dam project.
It should be noted that Sime Darby had announced the RM964mil provision before announcing its third quarter results.
Hence some industry observers said that Sime Darby should be more pro-active in disclosing its provisions this time around, after news reports highlighted that more provisions were likely in store.
Sime Darby is slated to announce its fourth quarter and full year results for the year ended June 31, 2010 on August 27.
Bakke has also made some personnel changes in the group.
Although no announcement has been made to this effect, Sime Darby’s website reveals that Hisham Hamdan, the head of the troubled E&U division, now heads the group’s China division, while Datuk Jauhari Hamidi has been promoted to head the E&U division.
Earlier this year, Hisham had taken over the reins as head of the E&U division after the resignation of Datuk Mohd Shukri Baharom, whose contract was due to expire at the end of 2010.
Analysts said they had not changed their earnings estimates on Sime Darby.
“We can’t change our forecast based on rumours,” said RHB Research analyst Hoe Lee Leng.
She added that it was difficult for anyone other than the external parties involved in the forensic audit on Sime Darby to reveal their report which was targeted to come out on August 24.
Hoe projects Sime Darby’s full year profit to be RM1.3bil while CIMB Investment Research analyst Ivy Ng expects the conglomerate to rake in a profit of RM1.5bil.
Sime Darby’s shares ended the day flat yesterday at RM7.52 with only 3.1mil shares changing hands.
In an announcement to Bursa Malaysia yesterday, Sime Darby said it would announce its fourth quarter results on Aug 26.
“Until then, we cannot comment on the results of the group except that we expect the company to report a profit for the year ended June 30, 2010 based on its best estimates.
“We wish to also inform that the result of the forensic investigations is expected to be announced by the end of September,” it said.
By RISEN JAYASEELAN
risen@thestar.com.my
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