Sembcorp Industries 2Q18 net profit rose 46.8 percent despite marine segment loss

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Sembcorp Industries reported on Friday that second-quarter net profit rose 46.8 percent on-year to S$81.92 million, despite a loss in the marine division as the utilities segment’s contribution nearly doubled.

“Utilities continues to be the key net profit contributor,” it said.

Turnover for the second quarter rose 46.6 percent on-year to S$3.3 billion, mainly on higher revenue from the marine and utilities divisions, it said in a filing to SGX before the market open on Friday.

Utilities revenue rose to S$1.7 billion in the quarter, up S$95 million on-year, mainly from Singapore, China, India and U.K. operations, it said. The segment’s net profit for the quarter rose 97.8 percent on-year to S$85.0 million, with the India operation delivering S$39.4 million in profit, it said.

The Singapore utilities segment benefited from higher HSFO prices, India from higher volume and prices, the U.K. from higher generation and China from contributions from the Changzhi water treatment plant, which began operations in September 2017, it said.

Turnover for the marine segment rose by S$978.3 million on-year in the quarter, mainly on revenue recognition from the delivery of two jack-up rigs and the sale of a semi-submersible rig, it said. The net loss for the marine segment was S$33.72 million, compared with a restated net profit of S$2.97 million for the year-earlier quarter, it said, attributing it to a loss on the sale of the semi-submersible rig and lower overall business volume.

The urban development segment delivered net profit of S$35.4 million in the quarter, up 314 percent on-year, as a commercial and residential land sale was recognized in Chengdu, it said.

For the first half, net profit fell 7.9 percent on-year to S$158.6 million, while turnover for the first half rose 38.6 percent on-year to S$6.1 billion, mainly on increased revenue from utilities and marine, it said.

Cautious near-term outlook

In its outlook statement, the company was cautious for the near term.

“The market environment is expected to remain challenging in 2018. A broader-based global recovery is underway, aided by a rebound in investment and trade,” it said. “As the group re-positions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery.”

Sembcorp Industries said it expected the utilities business to deliver a better 2018 performance, supported by an expected turnaround in the profitability of its Indian energy operations.

For the marine segment, the company said it expected it would take “some time” for a sustained recovery in new orders to be seen, despite projected improvement in E&P capex spending, with the overall industry outlook to remain challenging.

“The trend of negative operating profit will continue in the near term” for the marine segment, it said.

Neil McGregor, group president and CEO of Sembcorp Industries, was cautiously upbeat.

“In the first half of this year, we made progress in our strategy to reposition the utilities business and build integrated energy platforms. We consolidated our thermal and renewable energy businesses in India to position for an IPO,” he said in the statement. “We acquired the U.K.’s largest flexible distributed energy player, and entered the Australian renewables market. We also deepened our presence in Singapore by building a major position in the solar market, and extended our gas business with LNG importation.”

But he added that it was still “early days” of the company’s transformation.

This article was originally published on Friday, 3 August 2018 at 8:08 A.M. SGT; it has since been updated.


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