Sembcorp Q3 profit falls on lower marine revenue, higher costs

Higher finance costs and lower revenue eroded third-quarter earnings for Sembcorp Industries, which also wrote down $56.3 million on its utilities business in Singapore.

Net profit for the group tumbled 37.7 per cent to $33.6 million from the previous year.

This translates to earnings per share of 1.23 cents, down from 2.47 cents in the same period a year ago.

For the three months ended Sept 30, revenue fell 15.5 per cent to $1.81 billion from the preceding year, as reduced contribution from the marine division more than offset an increase in the utilities division's turnover.

Subsidiary Sembcorp Marine's (SembMarine) revenue had plunged 64.3 per cent year on year due to lower revenue recognition for rig building and offshore platform projects as well as revenue reversal after two rig contracts were terminated.

Sembcorp's net other operating income surged to $44.4 million in the quarter, from $3.9 million a year ago, thanks to fair value gains from mark-to-market adjustments of currency derivatives, and foreign exchange gains from SembMarine's revaluation of liabilities denominated in the US dollar to the Brazilian real.

This was, however, nearly all erased by an increase of $36.1 million in finance costs.


  • REVENUE: $1.81 billion (-15.5%)

    NET PROFIT: $33.6 million (-37.7%)

These were due to SembMarine's higher bank borrowings and finance costs for Sembcorp's newest thermal power plant in India, Sembcorp Gayatri Power Limited.

Sembcorp made an impairment of $25.8 million as it wrote off the steam boilers in the Singapore power plant which had been built in the late 1990s.

The group plans to use an upcoming waste-to-energy plant on Jurong Island to produce steam more efficiently instead.

It also made an impairment of $26.4 million on the goodwill value for Sembcorp Cogen that was acquired in 2003, as the cogeneration plant has been making losses over a period of time, said chief financial officer Koh Chiap Khiong in a briefing.

Another $4.2 million in impairment was made in relation to the utilities division's investment in an associated company.

At the briefing, chief executive Neil McGregor also told analysts and reporters that it has signed an agreement to sell utilities assets that were previously serving Jurong Aromatics Corporation (JAC) to ExxonMobil Asia Pacific.

ExxonMobil had acquired JAC's plant earlier this year.

The boilers, cooling tower and associated assets will be sold for US$113 million (S$153 million), he said. The deal will be completed between the second half of 2019 and first half of 2020.

Shares in Sembcorp fell two cents, or 0.6 per cent, to $3.38 before the results were announced.

A version of this article appeared in the print edition of The Straits Times on November 03, 2017, with the headline 'Sembcorp Q3 profit falls on lower marine revenue, higher costs'. Subscribe