13/05/2010 (AFP), Kuala Lumpur - Malaysian conglomerate Sime Darby said Thursday it had asked its chief executive to take leave of absence after huge cost overruns in its energy and utilities division.

Sime Darby, the world's largest listed palm oil producer, said it was braced for losses of 964 million ringgit (300 million dollars) due to problems with projects such as the controversial Bakun mega-dam in Borneo.

"The board has seriously considered the implications... and is taking immediate and stringent measures to correct the deficiencies identified," it said.

President and group CEO Ahmad Zubir Murshid "has been asked to take leave of absence prior to the expiry of his contract on 26 November 2010", a company statement said.

Company officials said that the overruns, uncovered when Sime Darby set up a work group to look into its troubled energy and utilities division, would be recognised in third-quarter results due out May 27.

They said that after posting profits of 1.11 billion ringgit in the first half of the 2010 financial year, the firm was likely to report its first ever quarterly loss.

Sime Darby said that the Bakun dam project, in which Sime Engineering holds a 35.7 percent interest, was awarded in September 2002 and initially scheduled for completion in September 2007.

"However, due to various factors, completion has been delayed and costs have escalated. Management estimates that there could be a potential additional cost attributable to the Group in the financial year 2010 results of 450 million ringgit."

The dam, which involves flooding an area the size of Singapore, has attracted fierce criticism of its impact on the environment and the forced relocation of some 10,000 indigenous people.

The management shake-up comes barely two years after two senior officials, including the conglomerate's chief financial officer, were dismissed after one of Sime Darby's palm oil processing units was discovered to have incurred massive losses from derivatives trading.

Trade in Sime Darby's shares was halted Thursday ahead of the announcement.

"The losses were bigger than expected and may hurt sentiment for the stock," Ivy Ng, senior analyst at CIMB Investment Bank, told Dow Jones Newswires, adding that any delay in finding a successor would depress the share price.

"It will be a tall bill to find a good replacement," said Yeh Kim Leng, chief economist with RAM Holdings, because of the firm's widely diversified nature.

"I think the investors would like to see a new, capable and credible successor to manage the world's largest oil palm plantation company as well as a company that has diversified business in oil and gas and property."