February 27, 2017 / 10:32 AM / 6 months ago

UPDATE 1-Malaysia's Sime Darby to restructure before spinning off units

* Restructuring to include loans, transfer of land assets

* "Aggressive timeline" for plantation, property listings –CEO

* Q2 profit more than doubles (Recasts with restructuring details, company comments)

By Emily Chow

KUALA LUMPUR, Feb 27 (Reuters) - Malaysian conglomerate Sime Darby Bhd on Monday said it would restructure itself to ensure "an optimal capital structure" for the plantations and property businesses that it plans to spin off.

Restructuring will involve group debt, capitalisation of inter-company loans, and the transfer of assets including land, it said. The process would involve working with credit-rating firms, lenders and creditors, it said.

The announcement comes after the conglomerate in January said it would list the businesses separately on the local stock exchange to enhance shareholder value. Sime Darby Bhd will retain its industrial, motors, logistics and healthcare divisions.

"We're working hard to hit an aggressive timeline, maybe by the end of this year, if not early next year," group Chief Executive Officer Mohd Bakke Salleh told reporters after the conglomerate reported second-quarter profit that more than doubled.

Bakke said Sime Darby will distribute shares in the two resulting companies to existing shareholders and that there would be no initial public offering to raise any funds. Sime Darby Bhd will not own any shares in the pair.

Sime Darby's plantations and property arms accounted for nearly 70 percent of the conglomerate's profit for the 2016 business year.

The restructuring comes after analysts and credit-ratings firms expressed concern over its plan to spin off the businesses.

Moody's Investors Service placed Sime Darby on review for a credit-rating downgrade earlier this month following the decision to list the two divisions.

Sime Darby's plantation business - its most profitable unit, featuring the world's largest palm oil operation by land size - shielded the weaker property and logistics divisions, and spinning it off could leave the conglomerate vulnerable, analysts said.

PROFIT MORE THAN DOUBLES

Earlier on Monday, Sime Darby said second-quarter profit rose to 644 million ringgit ($145.01 million) for the three months through December, from 285 million ringgit a year prior, buoyed by improved production and higher palm oil prices.

Revenue rose 4.2 percent to 12.3 billion ringgit.

Benchmark Malaysian palm oil futures surged 18 percent over the last three months of 2016, hitting a four-year high of 3,202 ringgit per tonne.

On Monday, CEO Bakke said he expected a price of 2,900 ringgit to 3,000 ringgit per tonne over March and April.

"The (crude palm oil) price increase was mainly driven by an industry-wide production deficit due to the lingering effects of 2015's El Nino weather phenomenon," Sime Darby said in a statement.

The weather event, which brings scorching heat across Southeast Asia, curbed palm yields in top growers Indonesia and Malaysia last year. ($1 = 4.4410 ringgit) (Reporting by Emily Chow; Writing by A. Ananthalakshmi; Editing by Christopher Cushing)

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