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UPDATE 2-Malaysia Sime profit up on palmoil, H2 seen tougher

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KUALA LUMPUR, Feb 27 (Reuters) - Malaysia's Sime Darby Bhd reported on Thursday a 12 percent rise in half-year earnings on the back of firmer palm oil prices, but warned of a tougher second half.

Although Sime said it was optimistic for the rest of the financial year, it warned that results might be hit by continuing pressure on margins of its motor vehicle distribution unit, greater competition for tyre products and a potential war in Iraq.

Sime shares, suspended on Thursday for the earnings announcement, last traded at 5.15 ringgit and are up 3.8 percent since the start of the year.

One of Asia's oldest conglomerates, Sime has diversified businesses spanning plantations, property, tyre manufacturing, power generation, and car distribution for Ford Motor Co and BMW in Malaysia, Hong Kong and Singapore, and Nissan Motor Co in China.

Sime said net profit rose to 420.48 million ringgit ($110.65 million) in the six months to end-December 2002, from 374.29 million ringgit in the same period a year earlier.

Revenue jumped 22 percent to 7.01 billion ringgit.

The result was within market expectations.

Analysts polled by Multex Global Estimates put a consensus net profit for the full year at 880.55 million ringgit, up from 771.22 million a year earlier.

"Going forward for the next six months... I expect the plantation division to remain a significant profit contributor to the group no matter what happens," Sime Group Chief Executive Nik Mohamed Nik Yaacob told a news conference.

"If the price can remain at today's level, 1,500-1,600 level, that is good for us," said Nik Mohamed, referring to Malaysia's palm oil futures which have gained nearly 40 percent since January 2002.

During the second quarter, pre-tax profit from the plantations division rose to 71.5 million ringgit from 63.2 million in the preceding quarter, accounting for a quarter of group profit.

Selling prices of crude palm oil averaged 1,453 ringgit a tonne in the October-December quarter, up from 1,376 ringgit in the preceding quarter.

Nik said there was still room for palm oil prices to go up to 1,700 ringgit because of a steady global demand for edible oils.

"Generally we have seen that demand for edible oils including palm oil has been increasing on a long-term basis, trend wise, year to year," he said.

Sime profit from the group's motor division fell to 64.3 million ringgit from 72.4 million in the first quarter, hit by poor margins made worse by a strengthening euro.

Sime said its heavy equipment division also had lower profits due to the holidays in December and very strong sales of new machines in Australia during the preceding quarter. ($1 = 3.8 ringgit)