Marine loss drags down Sembcorp Industries' Q4 profit

Marine loss drags down Sembcorp Industries' Q4 profit


SEMBCORP Industries' fourth-quarter net profit plunged 74.7 per cent to S$60.78 million, from S$240.62 million for the year-ago quarter, as its marine business slid into the red, marring the strong performance of its utilities business.

Group turnover was S$2.42 billion, down from S$2.66 billion.

Earnings per share were 2.86 Singapore cents compared with 13.33 cents a year ago.

Full-year profit attributable to shareholders was S$548.86 million, down 31.5 per cent from S$801.1 million for FY14. Turnover was S$9.54 billion for FY15, down from S$10.89 billion for the previous year. Earnings per share were 29.17 Singapore cents, down from 44.31 cents.

Sembcorp Industries proposed a final dividend of six Singapore cents per share , bringing the total dividend for the year to 11 cents per share.

Bolstered by divestment gains, its utilities business delivered a Q4 profit of S$395.2 million, up from S$109.4 million, resulting in a 72 per cent increase in full-year net profit to S$701.5 million. But the group's bottom line was hit as the marine business swung to a Q4 net loss of S$327.5 million from a net profit of S$105.9 million.

Full-year net loss in the marine business was S$176 million, against a net profit of S$340 million the previous year. Its urban development business rose 6 per cent to S$15.9 million for the quarter but was down 25 per cent at S$33.5 million for the full year.

Sembcorp Industries chief executive Tang Kin Fei said the group has built up "a strong income base" in its utilities business. Its utilities division has expanded its capacities for power generation by 90 per cent to 10,000 MW and industrial and water treatment by 54 per cent to 9.2 million cubic metres per day, over the last five years through to 2015.

Mr Tang flagged interest in Indonesia where Sembcorp Industries is understood to be eyeing projects stemming from President Joko Widodo's 35 GW country-wide power generation programme.

He also hinted at the intent to further expand the renewable power capacity under the power generation portfolio, which has already increased fourfold in 2015 to 1546 MW.

Addressing the turbulence confronting Sembcorp Marine, the marine subsidiary of Sembcorp Industries, Mr Tang said the conglomerate remains confident in the long-term fundamentals of the offshore marine sector.

Sembcorp Marine turned red after taking on board S$609 million of impairments and provisions on its rig building contracts, including S$329 million for the Sete Brasil seven-drillship deal. Mr Tan expressed confidence that SembMarine, with its extended capabilities to service the production segment of the upstream oil and gas value chain, will be well-positioned to ride out the storm.

SembMarine "has a lot of capabilities besides exploration services" including its proprietary GraviFloat technology, which can be applied to developing "import facilities for liquefied natural gas", the demand of which is driven by power generation requirements, he explained.

Asked to comment on market speculation on the likelihood of Sembcorp Industries taking SembMarine private, Mr Tang said: "Whatever decision we make has to be accretive to the company shareholders." He added that the outlook of the marine sector remains unclear and Sembcorp Industries should reserve cash to grow other businesses if SembMarine "can operate healthily" on a standalone basis. Sembcorp Industries posted over S$400 million in net gain from divestments in FY15, which the conglomerate indicated will go towards investment in businesses and markets with high growth potential.

Shares in Sembcorp Industries closed two cents up at S$2.53 on Wednesday before the results announcement.

This article was first published on February 18, 2016.
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