Sembmarine posts $647m H1 loss, expects better H2

Sembcorp Marine posted a loss of $647.2 million for the first half (H1) of FY2021, widening from a loss of $192.1 million in the corresponding year-ago period. But company executives said losses may narrow in the second half (H2), barring unforeseen circumstances.

The H1 losses were mostly attributable to $472 million worth of provisions. Of these, $361 million was for labour and other costs that are likely to be incurred over the next six to 18 months to complete existing projects. Other provisions included $65 million for the reinstatement of yards, and asset impairment losses of $46 million.

Work at Sembmarine's yards has been disrupted by manpower issues resulting from Covid-19-related curbs on bringing workers into Singapore.

To minimise further delays to project completions and to avoid cancellations of these projects, Sembmarine has had to actively seek skilled workers from alternative sources.

Excluding these provisions, Sembmarine's loss for H1 would have been $175 million.

In discussing the company's latest earnings, Sembmarine finance director William Goh said the company does not foresee the need for operational provisions in H2 for its existing projects.

Its revenue for the first half of the year fell 6.8 per cent to $844.2 million, from $906.2 million in the year-ago period, on the back of disruptions due to the Covid-19 pandemic that caused delays in the execution and completion of existing projects.

Loss per share came in at 5.16 cents, down from 8.83 cents in the corresponding period last year.

As at the end of last month, Sembmarine's net order book stood at $1.78 billion. This comprised $1.56 billion of projects under execution and $220 million of ongoing repairs and upgrades projects with firm deliveries this year.

Sembmarine has 16 ongoing projects, with five scheduled for completion this year and nine next year. The remaining two will be completed by 2025.

Chief executive Wong Weng Sun said the group is also "actively tendering" for more than 10 projects, and has not seen cancellations of existing ones as at the end of last month. But he stressed that the challenges faced by the group due to Covid-19 are "real and severe", and have lasted longer than anticipated.

This, he said, means that the $600 million of net cash proceeds raised from the rights issue last year is now insufficient. The group has already used $430 million for working capital purposes.

Sembmarine had on June 24 announced a $1.5 billion rights issue to address its "immediate funding needs" and to strengthen its financial position.

Phillip Securities analyst Terence Chua expects Sembmarine's near-term liquidity to be affected as loans mature over the next 18 months. But he, too, is more optimistic about H2.

Shares in Sembmarine closed at 10.8 cents yesterday before the results announcement, down 1.8 per cent, or 0.2 cent.

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