Here’s What Sembcorp Industries Limited Said About Its Dividend, Debt, and Cash Flow
Sembcorp Industries Limited (SGX: U96) held its 2016 fourth quarter earnings briefing in February. We will take a look at what the firm said about its dividends, debt, and cash flow during the briefing.
But first, as a quick background, Sembcorp Industries has three business segments, namely, Utilities, Marine, and Urban Development & Others. The former two are by far the most important segments for Sembcorp Industries. It’s also worth noting that the conglomerate’s Marine business stems from its majority ownership of Sembcorp Marine Ltd (SGX: S51).
On cash flow
Source: Sembcorp Industries earnings presentation
Koh Chiap Khiong, Sembcorp Industries’ chief financial officer, shared the following about the company’s cash flow for 2016:
“… cash flow from operations activities before changes in working capital were SGD1.325 billion. Net cash from operating activities was mainly due to marine’s receipts from completed rig building projects, partially offset by higher capital — working capital requirements in our startup plant in India.
Net cash outflow from investing activities for 2016 was SGD801 million, mainly for the CapEx and equity investments”
It is worth noting that Sembcorp Industries excludes capital expenditure related to business expansion for its calculation of free cash flow that you see above. But, expansion capex is still cash spent and will have to be financed with either cash from operations, debt, or other means.
On debt, debt, debt
Source: Sembcorp Industries earnings presentation
Regarding the conglomerate’s debt picture, this is what Koh said:
“Group total gross borrowing was SGD9.2 billion as at December 31. This was through the consolidation of the SGPL debt [SembCorp Gaytari Power Limited]. Corporate debt level remains healthy. Sembcorp Marine’s debt has increased for its working capital and for capital expenditure for the yards.”
At the end of 2016, Sembcorp Industries held gross debt of S$9.2 billion. From this amount, around S$4.1 billion comes from Sembcorp Marine. Meanwhile, S$3.4 billion is tagged as project finance debt.
Sembcorp Industries’ gross debt at end-2016 has also increased from S$6.8 billion at the end of 2015. As Koh noted, the majority of the increase comes from higher project finance debt and higher borrowings at Sembcorp Marine.
On dividends
Source: Sembcorp Industries earnings presentation
Sembcorp Industries’ dividend for 2016 was eight cents per share, a reduction from the 11 cents per share that it paid out in 2015. Koh said:
“We are proposing a final dividend of SGD0.04 per share, bringing the total dividends for the year 2016 to SGD0.08 per share. I think the next slide just summarizes what I said, and the dividend yield, based on yesterday’s prices [22 February 2016], is about 2.5%.”
The dividend of eight cents per share represents a payout ratio of 40%, according to Koh.
