Overseas utilities sectors to power Sembcorp's growth

Mr Tang says Sembcorp Industries' growth focus is mainly on rapidly developing economies. The group will continue to take advantage of "value-enhancing, strategically attractive opportunities that may arise".
Mr Tang says Sembcorp Industries' growth focus is mainly on rapidly developing economies. The group will continue to take advantage of "value-enhancing, strategically attractive opportunities that may arise".PHOTO: SEMBCORP INDUSTRIES

Conglomerate sees India, China operations sparking group profit as marine division treads water

Conglomerate Sembcorp Industries is gunning for a bigger share of the utilities market overseas, particularly in India and China, says group president and chief executive Tang Kin Fei.

"Sembcorp's growth focus is mainly on rapidly developing economies," he said in the group's annual report out on Monday.

"We see potential for our India and China operations to grow into major profit contributors."

Mr Tang believes Sembcorp is well-placed to grow in the thermal and renewable power sectors in India, where it already has over 3,500 MW of power capacity in operation and under development.

It also sees openings in China for renewable power, total water solutions and its niche power business.

WELL-PLACED

Sembcorp's utilities business is in a good position to grow. It is in the right businesses, with its focus on essential solutions, for which global demand continues to rise. It is also in the right markets, with its focus on rapidly developing economies.

MR TANG KIN FEI, group president and chief executive of Sembcorp Industries, on the company's utilities business seeing a very successful two decades.

Other markets with good potential include Myanmar, Vietnam, Indonesia and Bangladesh, he added.

Mr Tang said Sembcorp's utilities business has seen a "very successful two decades" - performing well with a solid income base built up.

"Sembcorp's utilities business is in a good position to grow. It is in the right businesses, with its focus on essential solutions, for which global demand continues to rise. It is also in the right markets, with its focus on rapidly developing economies."

Contribution from the utilities division comprised the bulk of the group's net profit last year at $701 million, while the marine segment languished with a $176 million net loss amid the industry downturn.

As a result, analysts are banking on what they see as deep value in Sembcorp's growing overseas utilities business.

Mr Tang acknowledged that last year was a "very challenging time" for Sembcorp Marine, which has put aside a hefty $609 million in impairment and provisions.

But he said Sembcorp Marine has taken appropriate and prudent measures in response to the challenges. "In addition, it has the right strategy in place to ride out a protracted downturn and lay stronger foundations for its future."

Citing the firm's diversified product offering which makes for "greater resilience", he noted that Sembcorp Marine has secured $3.2 billion in new contracts despite the depressed market conditions.

Mr Tang said: "As a group, we are in this for the long haul... Equally important, though, is that we continue to build Sembcorp's future as a global company. This means taking advantage of value-enhancing, strategically attractive opportunities that may arise, and also building platforms for growth."

A version of this article appeared in the print edition of The Straits Times on March 30, 2016, with the headline 'Overseas utilities sectors to power Sembcorp's growth'. Print Edition | Subscribe