Sembcorp returns to black with $46 million first-half profit

The increase came mainly from the group's conventional energy segment, which continued to be a key contributor.
The increase came mainly from the group's conventional energy segment, which continued to be a key contributor.PHOTO: SEMBCORP INDUSTRIES LTD

SINGAPORE - Sembcorp Industries on Friday (Aug 6) posted a net profit of $46 million for the first half of the year, reversing from a net loss of $131 million in the same period a year ago.

But its shares closed down three cents, or 1.5 per cent, to $2 after the company guided for more uncertainty in the coming months.

Sembcorp’s profit turnaround was supported by a 26 per cent increase in revenue to $3.3 billion for the six-month period.

The company would have registered higher earnings of $252 million had it not been for impairment expenses made on its 49 per cent-owned Chongqing Songzao coal-fired power plant in China. 

Expenses incurred by the Chongqing Songzao plant had risen sharply after the mines from which it sources coal closed down following a government directive in January, forcing it to procure coal from other provinces.

Sembcorp’s results translate to earnings per share of 2.58 cents from continuing operations, from a loss per share of 3.31 cents the year before.

The company will pay an interim dividend of two cents per share for the first half on Aug 24. No dividends were declared in the same period last year.

Sembcorp divides its business into three main arms: conventional energy, renewable energy and integrated urban solutions. 

For the first-half period, the group’s conventional energy segment posted a net profit of $185 million before exceptional items, compared with $127 million in the previous year.

Sembcorp’s renewables segment delivered a net profit of $24 million, compared with $33 million previously, due to lower wind resources for its India wind energy assets.

However, an additional 105 megawatts (MW) of renewable energy projects was secured in Singapore and Vietnam. The 60 MW-peak Sembcorp Tengeh Floating Solar Farm was also completed, said Sembcorp group president and chief executive Wong Kim Yin.

Sembcorp warned that its future performance could be negatively impacted by coal price volatility as well as uncertainty from the pandemic. 

It is also expecting loss of income as a result of changes to its customer profiles in Singapore and the UK, as well as from divested assets in Panama and Chile. Maintenance work is also scheduled for plants in Singapore, Myanmar and India in the second half of the year, which will disrupt operations. 

Meanwhile, the company will continue to restructure its portfolio to focus on renewables. This will ensure more it has more sustainable revenue streams as the world transitions to renewable energy. 

A total of 78 MW of renewable energy capacity has already been installed during the first half of the year, and approximately 87 MW of similar capacity is expected to come onstream by end 2021, Sembcorp said. 

Analysts from OCBC Investment Research expect Sembcorp  to generate better equity returns following its demerger with Sembcorp Marine last year. 

“But we would be even more encouraged if improvement in the future were to be driven by a fundamental pick-up in the utilities space”, they wrote in a report released on Friday. 

Successful execution of the company’s renewables strategy could see the stock rise further in the future, they said.