Sembcorp Marine posts first quarterly loss, warns of long downturn

SINGAPORE - Singaporean rig builder Sembcorp Marine Ltd posted its first quarterly loss, hit by writedowns and project delays by its key customers, underscoring the strain caused by plunging crude oil prices.

The company also warned that it expects the downtrend to last longer than previous cycles as Singapore's $10 billion rig building industry faces cancellations and a dearth of new orders.

For the fourth quarter, Sembcorp posted a S$535.2 million ($383 million) attributable loss, excluding non-operating items, compared with a profit S$174 million for the same year ago period.

It said fourth-quarter net profit would have been S$99 million before impairments and provisions and losses from associates and joint ventures.

Sembcorp Marine, which competes with Singapore's Keppel Corp Ltd for building jack-up rigs, made a S$278 million provision in the fourth quarter for foreseeable losses on contracts in progress.

Since the beginning of the millennium, Singapore's two rig builders have risen to dominate the global market for jackup rigs, which drill in depths as far as 122 metres (400 feet).

However, the recent plunge in oil prices has led to a drop in orders for rigs and cancelled contracts.

Reuters reported last month that Sembcorp Industries Ltd , the parent of Sembcorp Marine, may inject funds into the company or buy full control of the drilling rig builder to replenish finances.

Most orders at both Sembcorp Marine and Keppel are from Sete Brasil, an indebted affiliate of state-run Petroleo Brasileiro SA Petrobras. Sete Brasil has paid neither company since late 2014.

Sembcorp said it had made impairments and provisions of S$609 million for the full year for rig contracts, of which S$329 million relate to Sete Brasil.

The group's net order book backlog as of Dec. 31, 2015 was S$10.4 billion. Orders from Sete Brasil made up about half of Sembcorp Marine's order book.

Separately, shipbuilder COSCO Corp (Singapore) Ltd reported its fourth-quarter loss widened to S$483.8 million from a loss of S$13.2 million a year ago.