Sembcorp Marine (Sembmarine) is exploring alternative sources for its skilled labour, a move likely to incur increased manpower costs for ongoing projects, as it continues to face a shortage with the increased curbs under phase two of anti-coronavirus measures.
The marine and offshore engineering group yesterday said that to date, there has been no cancellation of any of its existing projects, and it would continue to coordinate with customers to reschedule project completions.
This comes just a day after the group announced that its wholly owned unit, Jurong Shipyard, has agreed to revise the delivery dates of two ultra-deepwater drill ships it has contracted to build for Transocean Offshore Deepwater Holdings, due to work disruptions arising from Covid-19.
Sembmarine said this is not expected to have any material impact on its earnings per share for the year ending December.
The delivery dates for the vessels, Deepwater Atlas and Deepwater Titan, have been rescheduled to December and next May, respectively. They were originally slated for delivery in the second half of this year, noted Citi Research analyst Chang Kwok Wei in a report.
Transocean has paid 35 per cent of the contract price for Deepwater Atlas, with about US$370 million (S$490 million) payable remaining, and 30 per cent for Deepwater Titan, with about US$440 million still to be paid.
The agreements further provide that upon the respective delivery of the vessels, Transocean will make partial delivery payment, with the remaining sums payable in quarterly instalments, with accrued interest of 4.5 per cent a year within five years from the delivery date, according to Mr Chang in yesterday's report.
He acknowledged that Sembmarine's net current liabilities position had finally been reversed in the first quarter of this year post-refinancing, but remains negative on the group.
"The deferment in delivery payments from Transocean will have an adverse impact on Sembmarine's cash flows," he said.
"We had previously expected an approximately $1 billion boost to the coffers in financial year 2021. However, this amount has now been stretched over a five-to six-year timeframe and would delay a return to free cash flow-positive territory."
Mr Chang also believes that the group is chasing large new-build contracts to provide ample coverage of its enlarged fixed-cost base, which will affect working capital requirements.
With the likely impact on Sembmarine's net gearing and the recent announcements, Citi has maintained its "sell" call on the group, with an unchanged target price of 14 cents.
Sembmarine shares closed unchanged at 20 cents yesterday.
THE BUSINESS TIMES