Sembcorp expects lower performance in energy business

Sembcorp expects losses to continue for its marine division. PHOTO: SEMBCORP INDUSTRIES LTD

Utilities and marine group Sembcorp Industries expects the performance of its energy business to be markedly lower than last year due to reduced demand and falling prices.

Sembcorp said yesterday that while its energy operations continue to be supported by long-term contracts, the impact of the pandemic and the reduction in economic activity amid lockdowns have hit the business.

Power demand in Singapore, India and Britain declined by about 10 to 25 per cent last month compared with the same month last year, the group noted.

Net profit for its energy business will also be affected by a currency transaction loss from the divestment of its water business in Chile, slated to be completed by the third quarter of this year.

The group said earlier this year that the performance of its energy business would also be hit due to the loss of contributions from divested assets and the absence of one-off income in Myanmar.

Sembcorp said that while overall business conditions remain bleak, the group expects to maintain positive operating cash flow this year due to its long-term contracts and diversified portfolio of businesses.

It added that containment measures imposed by governments around the world have led to delays in regulatory and other approvals for projects undertaken by its urban segment.

Economic uncertainty is also expected to lead to lower take-up and demand, or delayed launches for some of its integrated developments and properties.

It expects losses to continue for its marine division, the group added.

Activity levels remain low across the board apart from the repairs and upgrades segment, with overall business volumes expected to further weaken over the rest of the year.

The effects of the pandemic and low oil prices on the final investment decisions for projects will continue to hit new orders in the coming quarters, it added.

Sembcorp Marine said its priority is to ensure adequate liquidity to sustain operations and tide itself over the severe downturn, with the focus on opportunities less affected by the business climate.

Meanwhile, oil prices rose above US$30 a barrel for the first time in two months as producers in the United States and elsewhere continued to cut output. Futures in New York climbed about 5.6 per cent - a month after oil prices turned negative for the first time.

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A version of this article appeared in the print edition of The Straits Times on May 19, 2020, with the headline Sembcorp expects lower performance in energy business. Subscribe