KUALA LUMPUR (Feb 23): Sime Darby Property Bhd (SDP), whose share price jumped to a four-year high following its FY2023 earnings released earlier on Friday, said the weakening of the ringgit could impact its profit margins due to higher costs of raw materials.
SDP managing director Datuk Azmir Merican (pictured) said construction costs are vulnerable to currency fluctuations, especially when it involves imported raw materials.
“The exchange rate does give us a bit of an impact all the time, because of the price of raw materials [which will be] impacted [by] the exchange rates,” Azmir told a virtual media briefing in conjunction with SDP’s FY2023 results announcement on Friday.
Explaining further, he said that every 1% depreciation of the ringgit against the US dollar will translate to 0.15% or up to a 0.25% increase in construction costs.
On Tuesday (Feb 27), the ringgit reached a 26-year low, falling as much as 0.2% to RM4.7965 against the US dollar — its lowest level since January 1998.
“We do think that our [profit] margins could be affected going forward, if the situation continues,” Azmir said.
The net profit margins for the country’s largest property developer by land bank stood at 13% as at end-December 2023.
When asked if is there is any possibility of price increases to its property in 2024, Azmir remained cautious that SDP could absorb the higher material costs as the group has done previously.
“At the moment, we are monitoring the space. Whether you like it or not, I think you have seen [that] overall, property developers’ costs have increased slightly, as [constructions costs] are being affected, [resulting in] increased prices to purchasers.
“I think for us (SDP), so far, I would say and stress again [that] for the first quarter this year, it has not been so bad. There has been a situation [in which] we can absorb [costs] well. So, I hope the macroeconomics remain stable,” he added.
At noon break on Friday, SDP shares closed five sen or 6.54% higher to a four-year high of 81.5 sen, giving the group a market capitalisation of RM5.51 billion.
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Source: EdgeProp.my
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