Sembcorp Industries reports third quarter net profit fell 13 percent on-year to S$71 million as the energy segment’s contributions fell and the marine unit posted losses.
Turnover for the quarter ended 30 September declined 19 percent on-year to S$2.21 billion, the company said in a filing to SGX.
The energy segment posted net profit fell 11 percent on-year to S$81 million for the quarter, on turnover of S$1.65 billion, down 7 percent on-year.
“The decrease [in revenue] was mainly from Singapore, United Kingdom (UK) and the absence of contribution from South Africa post-divestment,” Sembcorp said. “The decline from Singapore came mainly from lower gas sales and lower turnover from the solid waste management business partly due to divested businesses. U.K. decline was mainly because of major maintenance of Teesside’s plants.”
The energy segment’s net profit was impacted by higher finance costs from Myanmar and Bangladesh after the commencement of commercial operations at plants there, the filing said.
“In India, the energy business is expected to continue to improve, underpinned by a positive long-term outlook for the India power market,” Sembcorp said.
Within Singapore, major maintenance shutdowns for power generation assets in the fourth quarter is expected to impact performance, the company said.
“The business will continue to reshape its portfolio towards renewables and sustainable solutions and execute its strategy to reposition for success amid the global energy transition and rising electricity demand,” Sembcorp said.
The marine segment posted a net loss of S$32 million, wider than the year-ago net loss of S$18 million, while the loss from operations (LFO) was S$53 million, wider than the S$23 million LFO a year earlier. Turnover for the marine segment fell 39 percent on-year to S$717 million, mainly on lower revenue recognition from rigs and floaters projects, the filing said.
“LFO for the third quarter of 2019 was mainly due to additional costs for rigs and floaters projects and continued lower overall business
volume offset by margin recognition from newly secured production floater projects and delivery of rig,” Sembcorp said, adding there was also a loss on the sale and delivery of certain rigs.
“Challenges in the offshore and marine sector persist and competition remains intense. Activity levels in all segments remain low except for repairs and upgrades, which continues to improve, underpinned by the cruise ship segment, and IMO regulations that require installation of ballast water treatment systems and gas scrubbers,” Sembcorp said. “Sembcorp Marine is expecting the trend of losses to continue into the fourth quarter, and the full year losses to be higher than last year.”
The urban segment posted net profit jumped 50 percent on-year in the quarter to S$12 million, mainly on higher land sales in Vietnam.
Turnover for the segment fell 50 percent on-year to S$1 million, Sembcorp said, explaining that the urban businesses are mainly associates or joint ventures and turnover is derived from providing services to those joint ventures and associates.
“Urban’s earnings growth is expected to continue into 2019, underpinned by a strong orderbook in Vietnam and the expected recognition of income from the sale of a residential development in China in the fourth quarter of 2019, subject to legal completion of the development,” Sembcorp said.
For the nine-month period, Sembcorp Industries reported net profit rose 9 percent on-year to S$262 million on turnover of S$7.30 billion, down 20 percent on-year.
“Underpinned by its Energy business, the group delivered a resilient set of results with profit growth for the first nine months of 2019 despite the losses incurred by its Marine business,” Neil McGregor, group president and CEO of Sembcorp Industries, said in the statement.