Sembcorp Industries Limited’s Latest Quarter: 5 Quotes from Mangement to Sum Up the Marine Business
The company has three business segments, namely, Utilities, Marine, and Urban Development and Others. The first two are by far the most important for Sembcorp Industries.
Let’s take a look at what Sembcorp Industries’ management shared about the Marine segment during the 2017 first quarter earnings briefing. It’s worth noting that the Marine segment comes from Sembcorp Industries’ majority ownership of Sembcorp Marine Ltd (SGX: S51).
Gloomy clouds remain
The Marine segment remains in a tough spot.
Source: Sembcorp Industries’ earnings presentation
Sembcorp Industries’ chief executive officer, Neil McGregor, provided this overview:
“The offshore and marine industry continues to remain challenging. In the first quarter 2017 our marine business, Sembcorp Marine, contributed a net profit of SGD 24.1 million to the Group. This is compared to a net profit of SGD 33.5 million in the first quarter of 2016.
The weaker performance was mainly due to lower contribution from rig-building projects.”
Despite the tough environment, the Marine segment managed to pick up some new orders. McGregor commented:
“Amidst challenging market conditions, the business secured SGD 75 million in new orders in the quarter, bringing its total net orderbook to SGD 7.1 billion.”
Excluding the orders from Sete Brasil, which is restructuring its business, Sembcorp Industries’ Marine segment ended the first quarter of 2017 with a net orderbook of $4 billion.
In other news, the Marine segment also sold its 30% stake in Cosco Shipyard Group, a China-based vessels builder, earlier this year. Here’s McGregor with some comments on the transaction:
“With the sale of its 30% equity stake in Cosco Shipyard Group in January 2017, the business expects to receive proceeds of SGD 220 million in second quarter 2017, which will be used to support business growth.”
Meanwhile, the Marine segment continues to deliver on some of its projects. Neil also said that enquiries for the segment’s non-drilling solutions continue to be healthy:
“In terms of delivery, Sembcorp Marine completed and delivered the FPSO [floating production and storage and offloading unit] Pioneiro de Libra, in first quarter 2017.
Enquiries for non-drilling solutions have gained momentum. Furthermore, customers’ interest in its Gravifloat near-shore gas infrastructure solution remains strong. And the business is in active discussions with several potential customers for this new business segment.”
As it stands, business at Sembcorp Industries’ Marine segment continues to be tepid. As such, its focus will be on financial discipline until the business environment improves. McGregor shared these remarks:
“In the meantime, business continues to focus on optimizing its human resources, as well as building new capabilities and competencies for long-term workforce sustainability. It continues to exercise financial discipline and prudence in its cash flow management.”
For perspective on the management of human resources, Sembcorp Marine has reduced its headcount by around 9,000 since 2015.