Seatrium back in black after six years with $36 million first-half net profit

SINGAPORE - After swimming in red ink for six years, Seatrium returned to profitability, fuelled by a tailwind of new orders on the back of buoyant energy prices.

The offshore and marine group posted underlying net profit of $115 million for the half year to end-June, thanks to strong execution and improving profit margins. This was a $379 million turnaround from losses in the year-ago period.

The underlying profit excludes a one-off provision for a settlement to MHWirth, a wholly owned subsidiary of US drilling services provider HMH, of $79 million.

Net profit attributable to shareholders came in at $36 million, reversing a loss of $264 million a year earlier. Earnings per share stood at 1.05 cents, versus a loss of 9.4 cents.

The results came on the back of revenue growth of 39.1 per cent to $4 billion, from $2.89 billion in 2023.

More critically, first-half underlying earnings before interest, tax, depreciation and amortisation (Ebitda) surged more than ninefold to $390 million, up from $36 million for the first half of 2023, thanks to progressive revenue recognition from new-build projects and increased repair and upgrade activities. Ebitda margin came in at 9.7 per cent.

The company pointed out that it also sits on a decade-high net order book of $26.1 billion, with deliveries till 2031, which it said provided a strong pipeline of future revenue. This included order wins of $13.4 billion during the January to June period in 2024.

This is the first time the company, previously known as Sembcorp Marine before its merger with Keppel Offshore & Marine, has posted profits since 2017.

Recently, Seatrium chief executive officer Chris Ong laid out an ambitious pathway for his company, including achieving Ebitda of more than $1 billion, return on assets of 8 per cent and gearing of less than two times by 2028.

The company has also identified $300 million in annualised synergies and savings via standardised pricing with customers and reduction in overheads. It is also aiming for $200 million in procurement savings by managing a more efficient supply chain.

The group’s balance sheet saw some strengthening as well, with the net leverage ratio coming in at 2.9 times as at June 30, compared with 3.2 times as at Dec 31, 2023.

Seatrium said it had also secured a $1.1 billion syndicated bank guarantee facility in July to support future project needs. It also obtained a $400 million committed green revolving loan facility from UOB to support environmentally sustainable projects.

In a statement accompanying its results, the company said the outlook for the offshore and marine industry remains positive, supported by broad-based demand across both the oil and gas and renewables sectors. 

“The group’s overall performance for the year will depend on the completion of its legacy projects, the safe, timely and on-budget execution of its order book, and the implementation of identified cost-saving initiatives to achieve a leaner cost structure.” 

Said Mr Ong: “As we work towards our 2028 targets, we will continue to grow our order book, build a leaner cost structure and execute our projects well. Through these, we are building a sustainably profitable and resilient business, and creating value for all stakeholders.”

Analysts Lim Siew Khee and Meghana Kande of CGS International raised their target price for Seatrium’s stock to $2.69, from $2.62 previously, citing sustained profitability through the second half, cost management and better gross margin.

Seatrium shares fell 11.3 per cent to close at $1.49 on Aug 2, as buyers squared off their positions and cashed out after chasing the stock up from around $1.50 to as high as $1.70. Brokers expect the price to recover when institutional investors start nibbling into the stock following the positive results.

The stock could also be supported as the company kicks off its $100 million share buyback programme in the coming months.