New orders drying up for Sembcorp Marine

Singapore

ALL SEEMS quiet on the order book front for rigbuilder Sembcorp Marine, which posted a sombre set of first-quarter earnings on Monday amidst an ongoing industry slump.

Though the mainboard-listed company has put on a brave front, saying in a statement that it "expects to build up its order book despite the current challenging market environment", its new orders this year have remained weak.

It has had zero rig orders, and the value of new contracts awarded sums up to only S$56 million in the first four months compared with the slightly over S$4 billion worth of new contracts it bagged in 2014.

The group posted a 13.6 per cent tumble in Q1 net profit to S$105.9 million from the preceding year, dragged down by lower revenue from rigbuilding and repair as well as higher operating expenses.

Turnover, which dipped 2.4 per cent to S$1.3 billion over the same period, was hurt by lower revenue recognition for rig building projects and lower average revenue per vessel repaired despite an increase in the number of ships repaired, the company said. Sembcorp Marine also racked up higher operating expenses, mainly due to a S$10.9 million foreign exchange loss.

While its net order book to date stands at S$10.6 billion with deliveries stretching into 2019, its only new order since the start of the year has been a S$56 million floating storage and offloading (FSO) conversion contract from Teekay Offshore, inked earlier this month. And although it signed a letter of intent (LOI) in March with Heerema Offshore to build a new semi-submersible crane vessel, that LOI hasn't turned into a contract yet, according to the group's press release on Monday.

Sembcorp Marine is also exploring options such as slowing down the construction of the drillships it is building for Sete Brasil, it said in its statement, noting that Brazil's oil and gas industry "continues to be mired in uncertainty". It said that it faced a "challenging" year ahead and added that it would "focus on cost and capital management".

It painted roughly the same picture as the group's rival, rigbuilder Keppel Corp, which said earlier this month that it had not had any drilling rig orders thus far this year. Keppel also said it may slow down construction for its projects with Sete Brasil.

Sembcorp Marine's earnings per share fell to 5.07 cents in Q1 from 5.87 cents the previous year. However, net asset value per share rose to S$1.487 as at March 31 from S$1.4192 as at Dec 31, 2014.

Sembcorp Marine shares fell nine cents to S$3.01 before its results were released on Monday.