MARC has affirmed the rating of Sime Darby Berhad’s (Sime Darby) RM1,500 million Al-Murabahah Commercial Papers/ Medium Term Notes (CP/MTN) at MARC-1ID/AAAID respectively. The affirmation of Sime Darby’s corporate debt ratings reflect the diversity of the Group’s business, its solid capitalization, resilient profitability levels, strong cash flow position and exceptional financial flexibility.

Founded in 1910, Sime Darby began its operations as one of the local pioneers in the plantations business. While it continues to operate in the plantations segment, it is also involved in other core business segments encompassing motor vehicle distribution, heavy equipment distribution, property and energy whilst maintaining a significant presence in general trading, services and other businesses. Its operations which span across major countries in the Asia Pacific region such as Malaysia, Singapore, Hong Kong, Australia and People’s Republic of China (PRC) have consistently generated pre-tax profit levels above the billion ringgit mark in the past 5 fiscal years, hence placing it as one of Malaysia’s and Southeast Asia’s largest multinational conglomerates.

Of its various business segments, the plantations, motor vehicle and heavy equipment distribution and property business segments continue to be major contributors to the Group’s revenue and profitability. The energy business segment, as expected, continues to grow from strength to strength, aided by contributions from its newly acquired power plant. In the near term, MARC believes that all major business segments will continue to record resilient results. Sime Darby’s bottom line results are likely to be boosted by high margin earners such as the property and plantations business segments which are expected to record strong performance in
2004. While MARC remains positive on the group’s continued foray in the energy business segment, the performance of its general trading, services and other business segments have remained lacklustre and is expected to remain so in the near term pending the outcome of the action plans implemented to improve the performance of these businesses.

On the back of strong performances from the Group’s core activities, revenue and pre-tax profit in FY2003 grew by 13.8% and 11.8% to RM13.7 billion and RM1.3 billion respectively. Operating profit margins continue to be stable at an average of 8.9% in the last four fiscal years. Geographically, about 38.0% and 64.9% of the Group’s revenue and pre-tax profit respectively were derived from its Malaysian operations. Contributions from overseas were mainly from Hong Kong, Singapore and Australia.

The Group’s cash flow protection measures continue to be strong with a marginal upside from the previous year’s levels. Cash flow generation capabilities remain resilient despite the increase in interest paid during the year with net cash flow from operating activities increasing from RM602.5 million to RM858.8 million in FY2003.

The Group’s solid capitalization is based upon its huge shareholders’ funds of RM7.9 billion as at FY2003. The debt leverage for the Group stood at a low 0.24 times in FY2003 (FY2002: 0.13 times) despite increasing debt by an additional RM1.1 billion during the year. Financial flexibility is exceptional, drawn from the Group’s large market capitalization, strong cash flow position and a comfortable level of unutilized credit lines, which are denominated in various currencies.