Sembcorp flags full-year loss on $89m in second-half impairments

Sembcorp Industries recorded a non-cash, non-recurring loss of about $1.12 billion following the completion of the distribution in specie of ordinary shares in Sembmarine's capital. PHOTO: SEMBCORP INDUSTRIES LTD

SINGAPORE (THE BUSINESS TIMES) - Sembcorp Industries expects to incur a loss for the full year ending Dec 31, 2020, as a result of $89 million in impairments, net of tax, recorded in the second half of 2020.

However, the industrial conglomerate expects to maintain positive operating cash flow in 2020, underpinned by the underlying profitable performance of its energy and urban businesses, it said in a profit guidance on Monday.

The impairments come amid the unprecedented impact of Covid-19 on the global economic outlook and challenging market environment, Sembcorp Industries said.

It will record an impairment of about $60 million for its UK Power Reserve assets resulting from a revised strategy for the business. The business will now focus on driving value from its existing portfolio, primarily in the grid services market.

The group will also record a $21 million impairment for utilities assets on Jurong Island comprising a wastewater treatment plant and woodchip boiler facility. It expects sales volumes to be "adversely affected" by the exit of a major customer from its Singapore manufacturing site operations on Jurong Island by the end of this year.

Sembcorp Industries saw an impairment of $8 million for a dedicated wastewater treatment plant in Nanjing, China, after the termination of a service agreement as the customer stopped production at its facilities.

Following the completion of the distribution in specie of ordinary shares in Sembcorp Marine's (Sembmarine) capital, Sembcorp Industries recorded a non-cash, non-recurring loss of about $1.12 billion. This resulted from the some $1.6 billion fair value of the distribution in specie as at Sept 11 being lower than the some $2.72 billion carrying amount of Sembmarine as at June 30.

Sembcorp Industries said the loss will be adjusted based on the carrying value of Sembmarine shares up to Sept 11.

The group said it monitors developments in its businesses and that it continues to review and assess the carrying value of its assets as it finalises its fiscal 2020 accounts.

It will release its unaudited consolidated financial results for H2 2020 and FY2020 on Feb 23, 2021.

Shares of Sembcorp Industries closed at $1.85 on Friday, down $0.01 or 0.5 per cent.

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