SembMarine: Expect ‘significant losses’ to continue in 2H21 amid supply-chain disruption, border controls

Singapore five-dollar note Photo by Leslie Shaffer

Sembcorp Marine (SembMarine) warned Thursday it expected to post “significant losses” in the second half of 2021, possibly as high as losses in the first half, when the company reported a net loss of S$647 million.

“While the group has made some progress in managing the delays in project completions, Covid-19 related measures continue to have a serious impact on the group’s performance,” SembMarine said in its third-quarter update filed to SGX.

Those impacts have included delays in equipment delivery due to border controls in some countries, longer lead times for purchasing new components due to supply chain constraints, slower-than-expected worker recruitment, worker attrition and Covid-related stop-work orders and disruptions, SembMarine said.

“Of the 16 projects under execution by the group, five projects have been further delayed by between one and three months. The group is therefore likely to incur further cost overruns of a material amount and is currently in negotiations with its counterparties and taking other measures to mitigate these cost overruns,” SembMarine said.

The company noted it is working with customer Equinor to plan the remaining scope of work on the Johan Castberg FPSO vessel to accommodate the transportation window for towing operations to Norway.

For the third quarter, SembMarine has successfully delivered projects, including two wellhead and one riser topsides and two bridges for
deployment to TotalEnergies’ Tyra East Redevelopment Field and an Offshore Substation (OSS) and Reactive Compensation Station (RCS) in to Ørsted Wind Power subsidiary Optimus Wind, the company said.

The repair and upgrades business also completed several key projects in the quarter, SembMarine said.

Outlook

SembMarine said it still faces “serious challenges and risks,” but it also expects significant growth in renewables and other clean energy segments over the next decade.

“Sembcorp Marine has made significant inroads into this sector and will focus on accelerating its transformation to gain further traction in this segment and strengthen its market share,” the update said.

“The group continues to build on its integrated offshore and marine engineering capabilities to move up the value chain and provide a wider suite of products and solutions for its existing business segments. This strategy is aimed at strengthening the group’s competitiveness,” SembMarine said.

Read SembMarine’s third-quarter update for details of new and current orders.