Hyflux profit dives 91 per cent despite record sales

SINGAPORE - Mainboard-listed Hyflux's revenue more than doubled to almost S$1 billion in 2016, but it failed to translate the increase into an improved bottom line.

Earnings plunged 91 per cent to S$4.8 million on a record revenue of S$987 million, more than double the S$445.2 million in 2015.

Group chief financial officer Lim Suat Wah yesterday noted increased earnings from higher engineering, procurement and construction (EPC) activities of TuasOne waste-to-energy project in Singapore and the Qurayyat Independent Water Project in Oman.

But these were substantially wiped out by losses from the Tuaspring power plant, largely due to the weak Singapore power market and electricity prices.

And if these losses were excluded, Ms Lim said the net profit last year would have been S$118 million, "a new record profit for the group".

Fourth-quarter results were not provided.

Ms Lim added that the net profit for the full year ended Dec 31, 2015, was restated from S$41.3 million to S$52.5 million to reflect a revision to the provisional fair value initially recorded for the acquisition of Tianjin Dagang Desalination Plant in China after an independent fair value assessment last year - a requirement by the Singapore Financial Reporting Standards.

Municipal projects continued to be the main contributor - accounting for about 92 per cent, or S$912.4 million, of the group's revenue - while Singapore and the Middle East, North Africa continued to be the group's key markets, accounting for 68 per cent and 26 per cent of total revenue, respectively.

Hyflux Board of Directors has proposed a final dividend of 0.25 Singapore cent per ordinary share, bringing the total dividends for the year to 0.45 cent per share.

The total dividend paid out in 2015 was 1.70 cents per share.

Hyflux said it would persist in actively chasing projects in key markets in the Middle East. Construction of Qurayyat IWP in Oman, TuasOne WTE project in Singapore and Khurais desalination project in Saudi Arabia will also continue to contribute to the group's revenue and profits.

And as part of its asset-light strategy, the group is divesting its mature assets.

The selling of its 50 per cent stake in treatment plant Galaxy NewSpring will be completed in March and Tianjin Dagang Desalination Plant has been classified as Held for Sale at the end of last year.

Hyflux will also seek partial divestment of its Tuaspring plant subject to the relevant regulatory approvals.

Its executive chairman and group chief executive Olivia Lum said the group still had a lot of good assets and with these divestments, "we will be able to pare down the debts and reduce the interests we have to pay".

"We will then be able to lighten the profit and loss, and our balance sheet will be much lighter. We can also recycle some of these money for potential projects and for our Elo Water business," she said.

Elo Water is a special oxygenated water said to contain three times more oxygen than tap water.

It was the reason behind Hyflux's US$8 million investment in European firm Kaqun Europe in November 2015.

Ms Lum said that after selling Elo Water online for a year in Singapore, Hyflux attained the licence to export Elo water into China last month.

While she cannot ascertain the total investment placed in the Elo business, she revealed that she intended to export Elo Water to the whole of Asia Pacific.

Ms Lum said there will not be brick-and-mortar shops for Elo, only on e-commerce.

Shares of Hyflux closed up one cent at 63 cents yesterday.

juditht@sph.com.sg

This article was first published on Feb 24, 2017.
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