PETALING JAYA: Sime Darby Bhd has bought part of Bucyrus distribution business from Caterpillar for US$360 million (RM1.1 billion).
In a statement, Sime Darby said the acquisition would help to strengthen the group’s industrial division in the mining industry by offering a wider range of mining equipment and services to its customers.
“It will also allow Sime Darby’s industrial division to leverage its position in Australasia’s rapidly growing mining industry, especially in Queensland, Northern Territory of Australia and Papua New Guinea,” the statement added.
According to the announcement to Bursa Malaysia yesterday, the acquisition was done through Sime Darby’s wholly-owned units, Hastings Deering (Australia) Ltd, Societe Caledonienne Des Tracteurs SAS and Hastings Deering (PNG) Ltd.
The assets acquired comprise owned and leased properties, plant and equipment, inventories, maintenance contracts, order book and employees.
Sime has an extensive presence in Queensland and Northern Territory of Australia in the mining equipment sector through its position as the largest distributor of Caterpillar’s mining trucks and tractors in Australia.
The industrial division is the second largest contributor to Sime Darby’s pre-tax earnings, generating RM1.06 billion or 18.8% of the conglomerate’s total pre-tax of RM5.44 billion for FY11 ended June. This is record earnings for the division.
For 1QFY12 ended Sept 30, the industrial division recorded a pre-tax profit of RM330 million, up 42% from RM232.3 million in the previous corresponding quarter. Revenue was at RM3.17 billion against RM2.37 billion a year ago.
Sime Darby attributed the strong earnings to the ongoing strong demand for heavy equipment in Australasia and Malaysia and the strong Australian dollar.
According to Ivy Ng, an analyst with CIMB Securities Sdn Bhd, the deal is a good one, and it will obviously improve Sime Darby’s growth prospects in the industrial sector.
The acquisition will complement Sime Darby’s existing product range in the heavy industrial equipment industry, and support its customers that are mainly mining companies down under.
“The potential earnings improvement from the acquisition will not be very significant. It will only enhance the group’s earnings by less than 1% ... at RM1.1 billion,” Ng told The Edge Financial Daily.
“The acquisition price is fair, but not cheap. However, it will be good for its long-term prospects,” she added.
Caterpillar said in a press release that the company intends to distribute Bucyrus’ mining products through Sime Darby’s other Caterpillar dealerships. Sime said the group’s industrial division will also start selling Bucyrus’ mining products in seven provinces in China through its dealerships operated by China Engineers Ltd.
In Malaysia, Caterpillar is represented by Sime Darby Industrial Sdn Bhd, while in Singapore, Maldives and Christmas Island, the heavy equipment maker is represented by Tractors Singapore Ltd.
Sime Darby may be allowed to distribute former Bucyrus’ products in other markets where it has Caterpillar dealerships such as China, Malaysia, Singapore and Christmas Island.
However, analysts are not excited on the potential earnings because besides China, the mining industries in the other countries are not as vast and developed as in Australia.
“There is not so much mining activity in Malaysia and Singapore, while Bucyrus’ products are used mainly in the mining industry.
“While they have a significant presence in China, it will take some time for the potential in China could be unearthed, as the mining industry there isn’t as developed as in Australia, which warrants expensive and high-technology equipment,” the analyst said.
This article appeared in The Edge Financial Daily, December 15, 2011.
In a statement, Sime Darby said the acquisition would help to strengthen the group’s industrial division in the mining industry by offering a wider range of mining equipment and services to its customers.
“It will also allow Sime Darby’s industrial division to leverage its position in Australasia’s rapidly growing mining industry, especially in Queensland, Northern Territory of Australia and Papua New Guinea,” the statement added.
According to the announcement to Bursa Malaysia yesterday, the acquisition was done through Sime Darby’s wholly-owned units, Hastings Deering (Australia) Ltd, Societe Caledonienne Des Tracteurs SAS and Hastings Deering (PNG) Ltd.
The assets acquired comprise owned and leased properties, plant and equipment, inventories, maintenance contracts, order book and employees.
Sime has an extensive presence in Queensland and Northern Territory of Australia in the mining equipment sector through its position as the largest distributor of Caterpillar’s mining trucks and tractors in Australia.
The industrial division is the second largest contributor to Sime Darby’s pre-tax earnings, generating RM1.06 billion or 18.8% of the conglomerate’s total pre-tax of RM5.44 billion for FY11 ended June. This is record earnings for the division.
For 1QFY12 ended Sept 30, the industrial division recorded a pre-tax profit of RM330 million, up 42% from RM232.3 million in the previous corresponding quarter. Revenue was at RM3.17 billion against RM2.37 billion a year ago.
Sime Darby attributed the strong earnings to the ongoing strong demand for heavy equipment in Australasia and Malaysia and the strong Australian dollar.
According to Ivy Ng, an analyst with CIMB Securities Sdn Bhd, the deal is a good one, and it will obviously improve Sime Darby’s growth prospects in the industrial sector.
The acquisition will complement Sime Darby’s existing product range in the heavy industrial equipment industry, and support its customers that are mainly mining companies down under.
“The potential earnings improvement from the acquisition will not be very significant. It will only enhance the group’s earnings by less than 1% ... at RM1.1 billion,” Ng told The Edge Financial Daily.
“The acquisition price is fair, but not cheap. However, it will be good for its long-term prospects,” she added.
Caterpillar said in a press release that the company intends to distribute Bucyrus’ mining products through Sime Darby’s other Caterpillar dealerships. Sime said the group’s industrial division will also start selling Bucyrus’ mining products in seven provinces in China through its dealerships operated by China Engineers Ltd.
In Malaysia, Caterpillar is represented by Sime Darby Industrial Sdn Bhd, while in Singapore, Maldives and Christmas Island, the heavy equipment maker is represented by Tractors Singapore Ltd.
Sime Darby may be allowed to distribute former Bucyrus’ products in other markets where it has Caterpillar dealerships such as China, Malaysia, Singapore and Christmas Island.
However, analysts are not excited on the potential earnings because besides China, the mining industries in the other countries are not as vast and developed as in Australia.
“There is not so much mining activity in Malaysia and Singapore, while Bucyrus’ products are used mainly in the mining industry.
“While they have a significant presence in China, it will take some time for the potential in China could be unearthed, as the mining industry there isn’t as developed as in Australia, which warrants expensive and high-technology equipment,” the analyst said.
This article appeared in The Edge Financial Daily, December 15, 2011.
