SINGAPORE - Sembcorp Industries' net profit nosedived 56 per cent in the third quarter, as all its business divisions except utilities fell into the red. For the quarter ended Sept 30, the group recorded a net profit of S$53.9 million, down from S$122.3 million a year ago.
Revenue slipped 11 per cent to S$2.1 billion due to lower contribution from its marine business and a subsidiary in specialised construction activities, it said.
Only the utilities division grew, with revenue inching up 3 per cent to S$1.2 billion, thanks to higher turnover from India and recognition of construction revenue for the group's Myanmar project.
Similarly, the division was the only one to record growth in net profit, which rose 21 per cent to S$108.9 million.
If the divestment of Zhumadian China Water Co recognised in the third quarter of last year was excluded, the segment would have delivered growth of 50 per cent, said Sembcorp.
The group's overseas utilities operations in India, China and the Middle East performed better, but net profit from the rest of Asia declined due to the absence of contribution from SembSita Pacific Pte Ltd, the holding company for an Australian integrated waste management business, which was divested in fourth quarter last year.
The marine business recorded a loss of S$13.2 million, compared to a net profit of S$19.7 million a year ago, on the back of rig delivery deferment requests from customers.
Meanwhile, lower land sales recognition from Sembcorp's Nanjing Eco HI-tech Island project and Chengdu Hi-tech project led to a net loss of S$1.4 million for its urban development segment.
Nevertheless, the group said it is expecting to recognise further profit from land sales in China in the fourth quarter.
It was, however, Sembcorp's others/corporate division that fell most deeply into the red.
Due to the mark-to-market impairment for vehicle distributor and Batam-Bintan developer Gallant Venture, in which Sembcorp holds a 12 per cent stake, the division reported a net loss of S$40.3 million.
Looking ahead, Sembcorp said its Singapore utilities business continues to face intense compeititon in the power market.
In India, it expects to complete the Sembcorp Gayatri Power (SGPL) plant by the end of the year, and is now working to secure long-term power purchase agreements.
Its utilities operations in China are also expected to perform better than last year.
For the marine business, receipts from project deliveries and achieving progress milestones have improved its cashflow and balance sheet during the quarter.
"The business will continue to focus on liquidity, costs and balance sheet management," said the group. "This includes active management of its manpower requirements in line with changing needs."
Sembcorp Marine has since last year axed 8,000 jobs, with some 2,000 estimated to have been cut in the past quarter.
Sembcorp Industries is expecting the urban development business to deliver a steady performance for the year.
"The current market environment remains challenging," said group chief financial officer Koh Chiap Khiong.
Nevertheless, the firm is confident that it can continue to create and deliver long-term value and growth with its presence in key emerging markets and strong capabilities, he added.
Sembcorp Industries shares closed at S$2.48 on Thursday, up three Singapore cents, before the results announcement.
Graphic: The Business Times
This article was first published on October 28, 2016.
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