Sembcorp Q3 profit down 11.6% with marine still in doldrums

Sembcorp's marine division swung to a net loss of $17.93 million for Q3 from a $60.41 million profit last year.
Sembcorp's marine division swung to a net loss of $17.93 million for Q3 from a $60.41 million profit last year.PHOTO: REUTERS

SINGAPORE - A challenging environment for its marine division was a drag on Sembcorp Industries' earnings for the third fiscal quarter, with the conglomerate posting an 11.6 per cent drop in net profit to $82.33 million, down from a restated $93.14 million recorded in the year-ago period.

Sembcorp's marine division swung to a net loss of $17.93 million for Q3 from a $60.41 million profit last year. However, turnover rose 60.2 per cent to $1.17 billion mainly due to higher revenue recognition for rigs and floaters on the delivery of two jack-up rigs and revenue recognition for newly secured projects.

However, a loss upon the sale of semi-submersible rig West Rigel and continued low overall business volume - which impacted absorption of overhead costs - contributed to the division's net loss, but this was offset by margin recognition from newly secured production floater projects and delivery of rigs.

The West Rigel rig was originally contracted to a subsidiary of North Atlantic Drilling and Seadrill, both of which subsequently applied for Chapter 11 restructuring in the United States.

Overall, Sembcorp recorded turnover of $3.02 billion for the period, a rise of 36.3 per cent, while earnings per share dipped to 3.98 cents from 4.56 cents in the same period last year.

Utilities saw profit soar to $90.97 million for Q3 from $27.49 million a year ago, on the back of a 26.7 per cent rise in turnover to $1.78 billion. Its India thermal power plant continued to contribute positively and improvement in Q3 came from its renewable power plant on good winds.

The group's urban development unit saw a 1.4 per cent easing in net profit to $8.06 million on a 14.9 per cent dip in turnover to $1.06 million.

Looking ahead, Sembcorp said its utilities business is on track to deliver better performance in 2018. However, overall business volume and activity for its marine business is expected to remain "relatively low" for the immediate quarters. Sembcorp Marine's cash resources remain sufficient, the group noted.

Sembcorp's group president and chief executive Neil McGregor said that Sembcorp has secured a 20-year renewable energy deal with Facebook to support its new data centre and other operations in Singapore.

"Our focus continues to be on lifting performance and investing in capabilities in line with our strategy to reposition in a rapidly changing global energy market," he said.

The market environment is expected to remain challenging for the rest of the year, Sembcorp said.

"While a broader-based global recovery is underway, downside risks to global growth have risen amidst rising trade and geopolitical challenges. The group remains confident that it has the right strategies and capabilities for the future," it said.

The group's counter ended 0.71 per cent higher to $2.84 on Thursday.