SembMarine slashes jobs, freezes pay to stem red ink

Sembcorp Marine is freezing salaries and cutting thousands of jobs as it tackles the severe downturn in the energy industry.

Chief executive Wong Weng Sun said yesterday that the firm has moved excess manpower from drilling to non-drilling work and "terminated less efficient sub-contractors and allowed for natural attrition of our employees".

The firm's EJA yard in Brazil has also reduced manpower.

"These measures have resulted in a reduction of about 8,000, comprising employees and sub-contractors' manpower," noted Mr Wong in a statement that accompanied the rig-builder's third-quarter results.

He added: "In addition to manpower optimisation, we have taken measures to reduce our operating costs by implementing salary freeze and adjustments to the variable remuneration components for management staff since 2015."

SembMarine's numbers mirrored the slump that has hit many firms in the sector.

It reported a net loss of $21.8 million for the three months to Sept 30, from a net profit of $32.1 million in the same period a year ago, while revenue dropped 21.4 per cent to $888 million. It had higher finance costs of $22.5 million and a share of losses of associates and joint ventures of $27.7 million.

Excluding the effects of foreign exchange, operating profit was $51.8 million, up on the $39.6 million in operating profit - before the effects of foreign exchange - from the same period last year.

Mr Wong said the oil and gas industry continues to grapple with a severe downturn, "now into its third year" after crude prices started to slump at the end of 2014.

This was despite members of the Organisation of Petroleum Exporting Countries agreeing last month to cut output for the first time in eight years.

He said the demand for offshore exploration and production activity is likely to remain weak in the foreseeable future, "especially given the existing excess supply of drilling rigs and many yet-to-be-delivered new-build rigs awaiting customer charters".

However, the firm still generated operating cash flow of $796 million, which contributed to reducing its net gearing. It also acquired Norwegian naval architecture firm LMG Marin for US$20 million (S$27.8 million) during the quarter.

Mr Wong said such "strategic acquisitions will further broaden and deepen SembMarine's proprietary design and engineering capabilities", among other things.

Loss per share for the quarter was 1.04 cents, from earnings of 1.54 cents a year ago. Net asset value per share was 119.38 cents as at Sept 30, from 120.24 cents as at Dec 31.

SembMarine shares closed 1.5 cents lower at $1.315 yesterday, before the results were announced.

This article was first published on October 26, 2016.
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