Q2 earnings plunge 61% at Sembcorp Industries

A Sembcorp Industries power plant in Singapore. The company has placed bets on its overseas forays as overcapacity in the Singapore power market has led to declining profits.
A Sembcorp Industries power plant in Singapore. The company has placed bets on its overseas forays as overcapacity in the Singapore power market has led to declining profits.PHOTO: SEMBCORP INDUSTRIES

Marine unit posts sharpest fall in profit but overseas operations report better results

Sembcorp Industries' earnings plunged 61.3 per cent in the second quarter, although its utility business in India helped offset losses in its marine business.

Net profit for the group fell to $86.5 million for the three months ended June 30, down from $223.6 million in the same period last year.

Revenue tumbled 22.7 per cent to $1.85 billion year on year.

First-half net profit fell 47.1 per cent to $193.5 million as revenue slid 20.8 per cent to $3.74 billion.

The marine unit faced the sharpest fall in profits, tumbling 89 per cent to $7.1 million. The company attributed the fall to lower contributions from rig building projects as there were customer deferment requests and higher finance costs.

Utilities provided the bright spot in the company's performance for the quarter. Even though net profit from utilities fell 47 per cent in the second quarter to $74.6 million, the company attributed a big part of the slide to the $54.7 million gain recorded in the second quarter last year from the sale of Sembcorp Bournemouth Water.

It emphasised that net profit from overseas operations rose by 2 per cent, coming in at $113 million.

  • AT A GLANCE

  • NET PROFIT: $86.5 million (-61.3%)

  • TURNOVER: $1.85 billion (-22.7%)

  • INTERIM DIVIDEND PER SHARE: 4 cents (-20%)

The company has placed bets on its overseas forays, as overcapacity in the power market in Singapore has led to declining profits.

It has two major power plants in India, the US$1.5 billion (S$2 billion) Thermal Powertech Corp India (TPCIL) and the US$1.5 billion Sembcorp Gayatri Power Limited.

Analysts are concerned about its India operations, questioning the shutdown of one TPCIL unit in April, as well as the lack of a long- term power purchase agreement for its Gayatri plant.

Mr Tang Kin Fei, group president and chief executive officer, said the "equipment failure" had been rectified. The TPCIL plant load factor had dropped from 83 per cent in the first quarter to 69 per cent, but he added that he expected a better second half with a higher target than the first quarter's showing.

Mr Tang said the company was in the bidding process for a long-term power purchasing agreement with Andhra Pradesh state in relation to the Gayatri complex and is "hopeful" that it can secure this contract before the end of this quarter.

Earnings per share for the second quarter came in at 4.3 cents, down from 12.2 cents previously.

Net asset value per share was $3.57 as at June 30, down from $3.60 as at Dec 31.

The company declared an interim dividend of four cents per ordinary share, down from five cents in the corresponding period last year.

Correction note: An earlier version of the story said that one of the two major power plants in India is the US$3 billion Sembcorp Gayatri Power Complex. This is incorrect. It should be the US$1.5 billion Sembcorp Gayatri Power Limited.

A version of this article appeared in the print edition of The Straits Times on August 03, 2016, with the headline 'Q2 earnings plunge 61% at Sembcorp Industries'. Print Edition | Subscribe