Sime Darby Group AGM: The Board Faced Irate Shareholders with Calm and Composure

November 16, 2010

UPDATE

Today’s AGM saw the re-appointments of Tun Musa Hitam and Tan Sri Dato’ Dr. Wan Mohd Zahid Noordin as Directors of the Company. They were both unanimously re-appointed.

Meanwhile, three directors of the company were reelected to the Board. They are  Tan Sri Datuk Amar (Dr) Tommy Bugo @ Hamid Bugo, Dato’ Seri Lim Haw Kuang and Mr Sreesanthan Eliathamby. All three directors were first appointed to the Board on  August 26, 2010. At the same time, Tan Sri Sheng Len Tao was also re-elected to the Board.

At the AGM, Musa also announced the resignation of Raja Tan Sri Dato’ Seri Arshad Raja Tun Uda from the Board of Sime Darby. Raja Arshad was appointed to the Board on  September 14, 2007. He was chairman of the Board Audit Committee and a member of the Board Risk Committee.

Six members of the Board of Directors did not seek reelection at the AGM. They are: Deputy Chairman, Tun Ahmad Sarji Abdul Hamid, 72, Dr Arifin Mohamad Siregar, 76, Tan Sri Datuk Dr Ahmad Tajuddin Ali, 62, Dato’ Seri Mohamed Sulaiman, 72, Dato’ Dr Abdul Halim Ismail, 71 and Datin Paduka Zaitoon Dato’ Othman, 70.

There were five new appointments to the Board of Directors, namely Tan Sri Dato’ Sri Hamad Kama Piah Che Othman, Tan Sri Datuk Dr Yusof Basiran, Puan Zaiton Mohd Hassan, Encik Azmi Mohd Ali and Dato’ Mohd Bakke Salleh who was appointed Executive Director.

MACC and SC to probe Sime Darby after getting Forensic Audit Report

By Jahabar Sadiq
Editor, the Malaysian Insider (www.malaysianinsider.com)

Authorities have begun investigating Sime Darby Berhad after receiving a forensic audit over its RM2.1 billion losses in its energy and utilities unit, as the troubled conglomerate holds its  Annual  General Meeting today.

The Malaysian Insider understands that the Malaysian Anti-Corruption Commission (MACC) and the Securities Commission (SC) received the forensic audit report recently after recording foreseeable losses of RM2.1 billion for its energy and utilities (E&U) division, one of the highest ever for the Malaysian conglomerate.

“The investigations are confidential,” a senior MACC official told The Malaysian Insider, declining to give further details.

The forensic audit report was due to be released in September, 2010 but the Board decided to keep it confidential and submit it to the authorities for further investigations and possible action against former senior officials.

It is learnt that the board meeting today could shed more light on details of the forensic audit. The government-linked group turned in a net profit of RM726 million for 2010 despite reporting a fourth quarter net loss after tax and minority interest of RM77.4 million.

Sime Darby reported RM1 billion in net profit for the fourth quarter of last year and a net profit of RM2.3 billion for the financial year ended June 30, 2010. The E&U division reported an operating loss of RM1.7 billion for 2010 after making additional provisions of RM777.3 million for the fourth quarter.

The last time Sime Darby saw such a large loss at one of its units came after the 1997 Asian Financial Crisis when a plunge in the stock market and a sharp depreciation of the ringgit led its financial arm, Sime Bank, to post a RM1.6 billion loss — the largest in Malaysian banking history — for the six months to December 1997.

The Malaysian Insider had reported on August 5, 2010 that the government conglomerate would announce that potential losses could top RM2 billion — and go as high as RM2.5 billion due to ill-advised investments in the energy and utilities sector in Qatar as well as tardy business practices in the development of the Bakun Dam in Sarawak.

The lower group profits and huge provisions at its energy and utilities division will likely add pressure on acting chief executive Datuk Bakke Salleh to turn around the GLC.

Sime Darby’s 2010 earnings fell short of analyst consensus forecast of a profit of between RM1.3 billion to RM1.5 billion excluding fourth quarter provisions. Sime Darby said that to achieve a more focused management approach to the E&U businesses, the division is now segregated into China and non-China operations with two different executive vice-presidents to oversee each respective business. New appointments have also been made to key management positions in the E&U Division.

The plantations to power and property conglomerate has also reviewed its organisational and reporting structure to enhance divisional oversight and accountability across the group.

Bakke had said that Sime Darby will revert to its original corporate structure by establishing a wholly owned anchor or flagship company for each of its six divisions. Each will have its own board staffed with directors from the main board as well as independent directors and industry experts.

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NOTE:

From Political to Corporate Survivor

The Sime AGM today  was attended by with 1000+ shareholders. It was held at the Sime Darby Convention Centre, Bukit Kiara. At a long and tough meeting, the Chairman and the Board of Directors faced irate shareholders.

What the Malaysian Insider has yet to report that at today’s Sime Darby AGM, Tun Musa Hitam, 76, was re-appointed as Chairman until the next AGM by virtue of proxy votes from institutional investors (like PNB, etc).

As a result, he survived minority shareholder criticism (implicit censure) that as a thorough bred politician, he did not understand governance (fundamentally that means transparency and accountability) and business.  Musa appeared cool under fire for the problems in the Oil and Gas Business of the Group where a provision is rm2.1billion has made to cover these losses.To his credit, he was able to maintain his composure and guided the AGM well.

Dato Bakke Salleh was impressive when he presented the Sime Darby Group turnaround programme which is centered on four areas, namely a) turnaround of the Oil and Gas Division; b) maximising potential across all core businesses; c) instituting a high performance culture; and d) reviewing the business portfolio mix within the Group to align its businesses to ensure that they remain dynamic and competitive by identifying businesses that Sime can expand, divest or incubate.

All resolutions presented as Ordinary Business  and Special Business of the Sime Group were carried by show of hands and proxy votes received by the Chairman.–Din Merican

PRESS RELEASE

FROM SIME DARBY GROUP COMMUNICATIONS

For Immediate Release
Tuesday, November 16, 2010

Musa Hitam: Sime Darby to take civil action relating the losses in the Oil & Gas Operations

Kuala Lumpur, November 16, 2010 – During its Annual General  Meeting this morning, Tun Musa Hitam, Chairman of Sime Darby Bhd, delivered a statement to shareholders to explain the company’s position with regard to several issues. The statement is reproduced below:

There has been a lot of interest and even more speculation with respect to the investigations that the company has been conducting into the losses at our Energy & Utilities Division. I am making this statement to clear the air, hopefully once and for all, so that fact and speculation can be separated. Also, I want to make it clear at the very outset that for legal reasons, we cannot table the findings of the forensic audit today and neither will we be revealing the findings today, because we must follow due process of law and protect the best interests of the Group in undertaking the necessary legal claims on behalf of the Group.

There have been reports in the media quoting me, but I want to categorically state that this is absolutely wrong – I did not say this at all.

The facts are: On 6 July 2010 the Board of Directors established the Investigative Reports Review Committee with Tan Sri Samsudin Osman as the chair. This committee was set up to consider and review the draft Investigative Review Reports that were prepared by forensic and legal advisors appointed by the Board with respect to certain projects of the E&U Division. The Committee was to report any prima facie findings of culpable conduct and whether there was possible civil action that could be taken against those culpable. In simple terms, this means that The Committee was to report who may have been in the wrong and whether or not we can take action against these people.

The final report of the external consultants was submitted to The Committee on  September  14, 2010 and was considered by the Board on 20 September 2010.

It is my duty to inform you that The Committee’s and consultants’ reports have been handed to the Securities Commission and a report has been lodged with the Malaysian Anti- Corruption Commission. These two bodies have informed us that they are conducting further investigations.

It is because of these on-going investigations that we are unable at this time as advised by legal counsel, to make the findings of The Committee known to you. The board has been advised by legal counsel to keep confidential the details of the report and nature of such proceedings so as not to adversely affect the interests of the Group.

What I can tell you is: (I) civil action is being taken by the company; (II) it is expected that we will commence our legal proceedings before the end of the year and (III) in the forensic report, the advisors have identified individuals with prima facie culpability. We will have to leave it to the Securities Commission and the MACC to take this further. As you know, criminal action is not within the purview of the company but in the hands of the authorities. Our role is to cooperate with the authorities and we have done so and will continue to do so as and when required.

Meanwhile, Sime Darby has engaged the services of a senior counsel who is, at the moment, preparing the civil actions to be filed. As soon as can be done after the civil action is filed and served, we will publish the claims for you to read. However, until a case is filed and served, legal counsel has advised that the details will need to remain confidential.

Meanwhile, your Board and the Management, led by our Acting President and GCE, have also drawn up a strategic plan to place the company on a stronger footing and to ensure that while controls, systems and processes are tightened, opportunities to grow and expand will not be missed.

Thank you.

Tun Musa Hitam
Chairman, Sime Darby Berhad

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