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SembMarine Q4 slips into the red on lower business volume

Full-year profit down 82 per cent at S$14.08 million; hopes are up for its first Gravifloat contract

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Lower overall business volume which hit the absorption of overhead costs dragged Sembcorp Marine into the red for the three months ended Dec 31, 2017.

Singapore

LOWER overall business volume which hit the absorption of overhead costs dragged Sembcorp Marine into the red for the three months ended Dec 31, 2017.

The offshore-and-marine counter posted a Q4 net loss of S$33.78 million, a reversal from the S$34.29 million profit the year before. Turnover was 21.1 per cent lower at S$654.95 million, mainly due to lower revenue recognition for rigs and floater and offshore-platform projects.

Loss per share for Q4 was 1.62 Singapore cents, compared to earnings per share of 1.64 cents for the corresponding quarter in 2016.

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But the group turned in a full-year net profit of S$14.08 million, 82.1 per cent lower than the year before. Full-year revenue fell 32.7 per cent to S$2.39 billion.

SembMarine's president and chief executive Wong Weng Sun said the reduced overall business volume had impacted the absorption of overhead costs, resulting in a lower operating profit and hence, net profit for FY17.

Excluding the effects of the sale of nine jack-up rigs to Borr Drilling and the termination of five such rigs during the year, turnover would have fallen by 28 per cent. It did not help that additional cost accruals were made in the final quarter for floater projects, which are pending finalisation with customers.

But the overall negative impact was partly offset by a gain on the disposal of SembMarine's stake in Cosco Shipyard Group Co, completed in January 2017, and a gain on the deemed disposal of available-for-sale financial assets from the group's step-up acquisition of Gravifloat AS.

There was a much smaller share of losses of associates and joint ventures, which, at S$3.62 million, was 89.7 per cent lower than S$35.13 million from a year ago.

Earnings per share for the full year was 0.67 cents compared with 3.77 cents the year before.

Despite poorer topline and bottomline for Q4 and the full-year, SembMarine's net gearing improved to 1.11 times as at the end of FY17, compared to 1.31 times as at end-September, mainly on the initial receipt from the divestment of its jack-up inventory.

SembMarine has received an upfront payment of US$500 million from Borr Drilling towards a deal pegged at US$1.3 billion, and a market-based fee for the sale of nine jack-ups. The remaining US$800 million will be paid any time within five years of the rig delivery dates.

Separately, the yard group entered into another deal last December for the sale of the semi-submersible West Rigel to a buyer for US$500 million.

But the group's net asset value per share slipped to 118.69 as at last Dec 31, down from the 122.62 cents as at Dec 31, 2016.

SembMarine sought to further diversify its revenue stream last year from rig-building and oilfield development projects. The yard group's repairs and upgrades division performed 390 dry-dockings, with revenue per vessel surpassing that of the year before on higher-value works and improved vessel mix. The repairs and upgrades division secured and completed 11 ballast water treatment system installations and retrofits for various ship-owners.

Mr Wong said that this year, the yard group hopes to secure the first near-shore liquefied natural gas project that will commercialise its proprietary Gravifloat technology. He did not name the client, but China-based Poly GCL has identified Gravifloat for its LNG exporting project in Djibouti.

With activity picking up for non-drilling projects, SembMarine is revisiting capital expenditure planned to bolster its capabilities to deliver existing and incoming orders.

Mr Wong said that capex, which stood at S$178 million for FY17, is now expected "to trend slightly upwards", particularly on the development of the new Tuas Boulevard Yard (TBY). He said SembMarine expects to operate from a corporate office at TBY no later than the first quarter of next year. The group is likely to maintain the lease for its Admiralty yard as long as "the market for retrofitting and upgrading remains active".

The directors have recommended a final dividend of one Singapore cent a share.

SembMarine closed flat at S$2.63 on Wednesday.

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