Sembcorp Marine issues profit warning

Rig-builder Sembcorp Marine (SembMarine) warned yesterday that it may post a net loss for this quarter along with a "significant decline" in net profit for the full year.

The group told the Singapore Exchange that it expects its financial results to be "materially negatively impacted", in line with previous disclosures relating to the challenging operating environment as well as to customers deferring or looking to defer rig orders.

SembMarine is due to announce its unaudited financial results on Feb 15.

"In the meantime, shareholders and investors are advised to exercise caution when dealing in the shares of the company," it said.

SembMarine has reported poor performance in recent quarters as the industry struggles amid the prolonged weakness in oil prices.

Its net profit for the three months to Sept 30 sank 37.8 per cent to $122.3 million from the same period a year earlier, while turnover dropped 21.8 per cent to $2.4 billion.

The profit warning follows news that SembMarine is caught in an ongoing dispute with Singapore-listed Marco Polo Marine over a US$214.3 million rig construction contract.

Marco Polo sought in November to unilaterally terminate the contract and demanded the refund of payments made.

This could potentially result in the first cancellation of a jack-up rig-building order commissioned to a Singapore-based rig-builder in this down-cycle.

SembMarine said that Marco Polo is in "repudiatory breach" of contract and that the purported termination "is wrongful and without any justification whatsoever". It said that the rig, due to have been delivered on Monday, was "more than 98 per cent" completed when Marco Polo terminated the order.

In the latest turn of events, Marco Polo on Monday rebutted SembMarine's claim, citing defects found on the rig as grounds to terminate the contract and request a refund.

The group said that 70 cracks were found on all three legs of the new rig during its first test, followed by more than 180 cracks in the partial second test.

It added that SembMarine did not deny the existence of these defects in its announcement on Nov 25.

SembMarine had said in that announcement that its subsidiary PPL Shipyards, which is building the rig, will have enough time to fix the defects.

SembMarine shares closed flat at $2.06 yesterday, before the announcement was made. The stock has tumbled about 37 per cent since the start of the year.

A version of this article appeared in the print edition of The Straits Times on December 02, 2015, with the headline 'Sembcorp Marine issues profit warning'. Print Edition | Subscribe