Merger-related provisions, expenses drag Seatrium deeper into the red with S$264.4 million H1 loss
Uma Devi &
Daphne Yow
SEATRIUM’S net loss widened to S$264.4 million for its first half ended Jun 30, from S$142.9 million in the same period a year earlier.
On Friday (Jul 28), Seatrium’s acting group finance director Paul Tan said the company’s financial results “reflect the completion” of its combination with Keppel Offshore & Marine (Keppel O&M), now known as Seatrium O&M.
Without the provisions for those expenses, its net loss for the period would have been S$33 million.
Higher costs for certain projects and merger-related costs amounted to $231 million. Tan said provisions for contracts took up a bigger portion of the total costs, but declined to provide a split between the two.
No dividend was declared for the period under review.
The group said the higher costs recorded for some of its projects, professional fees, net finance costs and tax expenses were partially offset by increased contributions from its repairs and upgrades businesses.
Loss per share was S$0.0047 for the half year, up from S$0.0046 the year before.
Seatrium’s top-line figures appeared more optimistic. Seatrium’s chief executive Chris Ong attributed the stronger revenue to the consolidation of projects after the combination, as well as continued operational milestones and deliveries.
Segmentally, the group’s rigs and floaters, repairs and upgrades, offshore platforms and specialised shipbuilding segments contributed to most of the revenue in H1 – almost S$2.9 billion – while its ship chartering segment contributed S$21.6 million.
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General and administrative expenses rose to S$153.9 million from S$58.4 million previously, after factoring in costs related to the group’s acquisition of Keppel O&M in February this year.
Finance costs nearly trebled to S$158.7 million from S$54.6 million in H1 FY2022, mainly due to higher interest expenses from increased borrowings.
Seatrium’s executives were tight-lipped on the provisions, writedowns and expenses related to the merger that were in the pipeline.
Tan said the merger expenses primarily comprise professional fees for the combination, as well as “transformation and integration costs”.
“These costs will reduce overtime,” he said.
Both Ong and Tan declined to comment on the magnitude of provisions and expenses that investors can expect in H2 or beyond, saying the company “does not give forecasts”. They also declined to comment on when the company expects to fully account for these two factors that are currently putting the most pressure on the group’s profitability.
Seatrium said it expects to make a net loss for FY2023.
Ong declined to comment on when the company would turn profitable but said the management is “leaving no stone unturned”.
“One of the main focus (points) is to execute our projects well, make sure that we are able to return a good Ebitda (earnings before interest, taxes, depreciation and amortisation) margin, and then we will take a look at the capital structure,” he said.
“We will be coming back to the market to educate on our strategic review results,” he said, referencing an ongoing strategic review that was announced in May. He added that the review is on track to be completed by the end of the year.
He also noted that Seatrium is holding on to an amount of cash that is “quite huge” – mainly comprising front-end payments by customers and money from the rights issue. This, he said, will help support the execution of projects.
Seatrium is also in advanced talks with its supporting banks to refinance loans that are due in the next 12 months.
“With the capital structure review, we will take a look at how to optimise our debt,” he said.
Shares of Seatrium closed 2.1 per cent or S$0.003 lower at S$0.143 on Friday.
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