Sembcorp Marine Second Quarter Profit Plunges

Published Jul 29, 2016 8:50 PM by The Maritime Executive

Singapore's rig builder Sembcorp Marine's second-quarter profit plummeted 90 percent, as the prolonged downturn in the oil markets hit orders and prompted customers to delay their projects.

Sembcorp posted a profit of S$11 million ($8.15 million), for the three months ended June, compared with a profit of S$109 million a year ago.

The company, majority-owned by industrial conglomerate Sembcorp Industries, posted revenue of S$908 million - a drop of about 25 percent from previous year.

The company said its profit was also impacted by foreign exchange translation, higher finance costs, impairment of available-for-sale financial assets and share of losses from associates.

"We expect conditions in the offshore oil and gas sector to remain challenging in the short-to-medium term," said Chief Executive Officer Wong Weng Sun.

SembMarine and its larger rival Keppel Corp have been hit by the 60 percent drop in oil prices since mid-2014.

SembMarine's net order stood at S$9.2 billion versus S$9.7 billion in the preceding three months.

Turnover for rigs and floaters was $956 million for the first half of 2016, a 45 percent year-on-year decline from the $1.7 billion booked in the previous corresponding period. Key deliveries included an accommodation semi-submersible vessel to Prosafe, the Ivar Aasen process, drilling and quarters topsides to Det noske olijeselskap and the Maersk Highlander F&G JU2000E jack-up rig to Maersk.

In July 2016, Sembcorp Marine also delivered the Noble Lloyd Noble jack-up rig to Noble Corporation. Receipts from this delivery and other major projects totalled more than S$900 million.

Excluding the orders for drillships from rig leaser Sete Brasil, which has filed for bankruptcy protection, SembMarine's backlog of net order stood at S$6 billion.

"Several rigs due for delivery in our order book have been deferred. We are in discussions with customers to progress these contracts," the company said in a presentation.

The company expects total capex for fiscal year 2016 to be less than half that of the previous year. It cuts its interim dividend to 1.5 Singapore cents a share, compared with four Singapore cents a year ago.