Sembmarine order book expected to grow further this year on bullish sector outlook

In August, Sembmarine posted a net loss of $142.9 million for the half year ended June 30. PHOTO: SHIN MIN DAILY NEWS

SINGAPORE - Marine and offshore engineering group Sembcorp Marine (Sembmarine) expects the size of its order book to grow further this year as the outlook for oil and gas, renewable energy and other green solutions continues to improve, the company's president and chief executive Wong Weng Sun said on Tuesday (Sept 6).

Speaking at a ShareInvestor virtual dialogue session, Mr Wong said: "Sembmarine's order visibility is much clearer and we are actively translating that order pipeline into firm contracts."

He added that the current energy crisis, brought about by geopolitical tensions, has also contributed to the firmer outlook for the business.

"The (demand) for immediate action to overcome the existing energy shortage (globally) is an opportunity for us, but more importantly, we believe the worst is behind us."

This comes after four consecutive years of losses that began in 2018, at a time when the industry was plagued by oil price volatility. Then came the pandemic in 2020, which exacerbated a drop in new orders.

The situation was so dire, the company had to initiate a $2.1 billion rights issue in September 2020, of which $1.5 billion went to paying down debt, while the balance was used as working capital. A second rights issue raising $1.5 billion to shore up the company's financial position was launched in June 2021.

"At the end of the day, we had to face the real risk of project termination if we could not complete the projects that had been contracted to us," said Mr Wong in reference to the second rights issue.

But with the outlook for the sector looking increasingly bullish due to constrained supply following years of underinvestment, Sembmarine is starting to see business recover.

In August, Sembmarine posted a net loss of $142.9 million for the half year ended June 30, compared with a $647.2 million loss recorded during the same period a year earlier.

Group finance director William Goh added that the company's net order book had crossed $2.5 billion after securing $1.9 billion worth of new orders in the first half of the year.  

Following the proposed merger between Sembmarine and Keppel Offshore & Marine (O&M), the combined orderbook of the new entity, once formed, would be in excess of $10 billion, Mr Goh said.

The $8.7 billion merger, which was announced in April and has been two years in the making, will result in the creation of a new company based on a 50:50 enterprise value ratio between Keppel O&M and Sembmarine.

The company is currently in the midst of obtaining regulatory approval for its merger with Keppel Corp's rig building unit, which will have a combined workforce of 20,000.

Mr Wong said the new entity will provide it with the reach to secure new business, as the combined reputation of the two companies in delivering high performance will provide assurance to potential customers.

He said: "With the combined entity I believe we are much better off and will definitely escalate the path to profitability."

Shares of Sembmarine closed on Tuesday at 11 cents, up 0.88 per cent.

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