Friday, May 14, 2010

Sime Darby Bleeds

Today’s The Sun has this for a front-page headline “Sime’s RM964m headache” referring to the shocking and profuse bleeding of this Malaysian conglomerate. I wouldn’t even call it a headache – more like a brain hemorrhage! In any case, Sime Darby Berhad’s board had asked their president and group chief executive Ahmad Zubir Murshid to take a leave of absence – nearly 6 months before his contract expires on November 26 – following massive cost overruns and project losses at their energy and utilities (E&U) division.

A work group set up to review the losses (arising from its oil and gas projects in Qatar and Sarawak’s Bakun hydroelectric dam) at the division estimates a negative impact of RM964 million on Sime Darby’s results for the second half of the current financial year ending June 30, 2010 (FY10). Assuming the entire amount is provided for in their books, it would mean that Sime Darby could potentially chalk up a marginal loss in their third-quarter results to be announced on May 27.

The Sun also mentioned that there could be a potential additional cost of RM450 million attributable to the group in the results of the current financial year (p 1).

Against the backdrop of RM1.113 billion of profits for the first half of FY10 chalked by Sime Darby, this is bound to have an unwelcomed impact on the Malaysian economy.

Interestingly, is Ahmad Zubir the only fall guy to take the rap? I would venture that the entire board, including group chairman Musa Hitam should take responsibility for this colossal spread of red ink, and that they do the honorable thing and resign.

I am sure as more news unfold – the public will be properly entertained with dark and delicious tales of managerial incompetence and negligence.

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