Sembcorp Industries painted a sobering picture of its prospects yesterday, noting that intense competition in the energy sector, weak oil prices and a shaky global economy will weigh on its business in the months to come.
Sembcorp made the prognosis as it unveiled its third-quarter results, which were hit by weaker revenues across its utilities and marine units.
Net profit for the three months ended Sept 30 fell 37.8 per cent from the same period a year earlier to $122.3 million.
Turnover for the quarter dropped 21.8 per cent from the same period a year ago to $2.4 billion.
Figures for the first nine months of the year were also weaker. Earnings for the nine months ended Sept 30 fell 12.9 per cent to $488.1 million, while turnover dropped 13.4 per cent to $7.13 billion.
Revenue in its utilities business fell in the third quarter and in the first nine months of the year, primarily because of weaker high sulphur fuel oil prices in Singapore, it said.
AT A GLANCE
NET PROFIT $122.3 million (-37.8%)
REVENUE $2.4 billion (-21.8%)
This was partially mitigated by a higher revenue contribution from its India operations - it acquired renewable energy company Semb-corp Green Infra in February and its first thermal power plant in India, Thermal Powertech Corporation India, began full commercial operations last month.
Sembcorp noted that the past nine months have been challenging for the Singapore energy business, and conditions will likely remain tough in the months ahead, due to continued intense competition in the power market and low oil prices.
However, with the expected completion of the divestment of its Australian waste management joint venture in the fourth quarter of this year, the utilities business should deliver a better performance overall for this year than last year,Sembcorp said.
Turnover in the marine business fell in the third quarter and the first nine months of the year as well, as some customers decided to defer taking delivery of jackup rigs that they had ordered in better times. This meant that revenue recognition had to be suspended for several rigbuilding contracts, Sembcorp said.
The firm also recorded lower average revenue per repair vessel, despite an increase in the number of ships repaired. "Low oil prices and the oversupply situation in the global offshore exploration segment continue to weigh on offshore rig utilisation and charter rates," Sembcorp noted.
However, although the immediate operating environment in the offshore rigbuilding industry remains "very challenging", the business remains focused on the timely and effective execution of its current orderbook and efficient working capital management, it added.
Earnings per share fell to 6.29 cents in the third quarter, from 10.86 cents in the same period a year earlier.
Net asset value per share grew from $3.15 at the end of December last year to $3.64 at the end of last month.
"While current market conditions are challenging, Sembcorp remains committed to delivering long-term value and growth," said chief executive Tang Kin Fei.
"In the quarter, we continued to achieve milestones in our overseas growth strategy.
"At the same time, we continue to unlock value for shareholders through divestments which provide us with additional resources to invest in businesses and markets with high growth potential, in line with our focus on the energy and water sectors."
Sembcorp shares fell three cents to $3.58 yesterday.