MARC is currently conducting a review of its MARC-1ID /AAAID /Stable debt ratings on Sime Darby Berhad (Sime).

Sime announced its second consecutive quarterly after-tax loss yesterday.  The group posted a fourth quarter after-tax loss of RM53.3 million for the three months ended June 30, 2010 compared to a loss of RM277.5 million for the immediate preceding quarter. Its full year profit for the financial year ended June 30, 2010 of RM854.8 million was 63.5% lower than a year ago.

The group's performance was dragged down by provisions for foreseeable losses and impairment in respect of projects under its energy and utilities division. The other core businesses of Sime, namely plantation, property, industrial and motors, had recorded satisfactory operating profits. The continuing positive offset to MARC’s concerns regarding the decline in Sime's profitability is its healthy liquidity position. Its cash and cash equivalents of RM4.4 billion as at end-June 2010 is augmented by fairly strong operating cash flow generation. The group generated consolidated operating cash flow from operations of RM3.7 billion for the 12 months ended June 30, 2010.

Sime had also announced the reorganisation of the group's businesses into six subsidiaries, each with its own board of directors and committees, to improve corporate governance.

MARC's review of Sime's ratings will focus on the implications of the continuing developments at the group for its recurring earnings and cash flow generation ability and business risk profile. The rating agency expects to conclude the rating review within the next 60 days.

Contacts:
Rajan Paramesran, 03-2090 2233/ rajan@marc.com.my;
Benjamin Yab, 03-2090 2270/ benjaminyab@marc.com.my.