Seatrium to pay over S$240 million to Brazilian, Singapore authorities over corruption offences
The group says there will be no impact on its 2025 financials because the sum was previously set aside; Citi issues ‘buy’ call, with target price of S$2.65
[SINGAPORE] Seatrium is putting a long-running corruption case behind it with the payment of financial penalties of more than S$240 million to the authorities in Brazil and Singapore.
On Wednesday (Jul 30), the company announced that it signed a leniency agreement with Brazilian prosecutors in relation to Operation Car Wash – the name given to a major corruption probe in Brazil that had initially focused on companies bribing politicians for contracts. It also signed an equivalent agreement with the Brazilian Attorney-General’s Office and the Comptroller General of the Union.
Seatrium’s subsidiary, Estaleiro Jurong Aracruz, a shipyard in Brazil, came under investigation in 2023 for its past conduct linked to the probe. The unit’s former president was charged by the Brazilian authorities for money laundering and corruption linked to contracts that subsidiaries of Sembcorp Marine – Seatrium’s former incarnation – entered into in 2012.
Operation Car Wash brought down many politicians and business executives, but critics said it took its aggressive tactics too far. The probe was shut down in February 2021.
Under the leniency agreements with Brazil, Seatrium will make a final settlement payment of around S$168.4 million.
Additionally, it is required to pay a financial penalty of US$110 million under a deferred prosecution agreement (DPA) it signed on Wednesday with the Singapore authorities.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
However, because the Singapore Attorney-General’s Chambers (AGC) has agreed that a maximum of US$53 million of Seatrium’s payments to the Brazilian authorities may be credited against this penalty, the company will pay the Singapore authorities a sum of US$57 million – around S$73.3 million – under the DPA, which is subject to approval of the Singapore High Court.
“The DPA will come into force only when the High Court approves it, after determining that it is in the interests of justice and that its terms are fair, reasonable and proportionate,” the AGC said in a statement on Wednesday.
Under the DPA, Seatrium must also review and improve its ethics and compliance programme “to reduce the risk of a recurrence of any similar conduct”, said the statement.
It added: “If the company subsequently fails to comply with the terms of the DPA as approved by the High Court, the public prosecutor may apply to the High Court to terminate the DPA. In the event the DPA is terminated, the public prosecutor may initiate criminal proceedings against the company in respect of the alleged offences.”
This news came a day ahead of Seatrium’s announcement of its first-half earnings on Jul 31.
The company said that there will be no material impact to its net earnings and net tangible asset per share for the financial year ending Dec 31, 2025. This is because it had previously made provisions in its financial statements for the in-principle settlement payment and financial penalty.
The group called for a trading halt on Wednesday morning, before the announcement. Seatrium shares tumbled to an intraday low of S$2.29 following the news and after the trading halt was lifted, but they later recovered and finished Wednesday 0.8 per cent or S$0.02 higher, at S$2.40.
The Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) have informed Seatrium that their joint investigation into its potential offences has concluded, the company said.
The authorities said no action will be taken against Seatrium or its employees.
On Wednesday, Citi assigned Seatrium a “buy” call and a target price of S$2.65.
The bank said: “Although the share price had recovered from the lows during the initial MAS and CAD investigation announcement, we believe the conclusion of the investigation will lift the remaining overhang on Seatrium. The next milestone (or hurdle) to future value creation may come with improving margins and financials in its results.
“We apply a target multiple of 1.2 times on FY2026 (estimates), as we believe the market will look into its long-term prospects as new higher-margin contracts should raise returns further and push return on equity higher.”
Seatrium said it is “keen to move forward” and to ride on energy-market tailwinds. It added that it has zero tolerance for fraud, bribery and corruption.
In February, Seatrium posted its first full-year profit since its 2023 reconstitution. It swung into the black with a S$156.8 million net profit in FY2024, a turnaround from the S$2 billion loss in FY2023.
What is Operation Car Wash?
Operation Car Wash was launched by the Brazilian authorities in 2014. In its initial years, the inquiry focused on companies that bribed politicians in exchange for state-run oil company Petrobras awarding them lucrative contracts.
One of the main players in the scandal was Brazilian construction conglomerate Odebrecht. The company eventually admitted to paying millions in bribes in multiple Latin American countries to secure public work contracts. The corruption scandal involving Odebrecht claimed victims such as Peru’s then-president Pedro Pablo Kuczynski and former Ecuadorean vice-president Jorge Glas.
Operation Car Wash succeeded in bringing a slew of politicians and business executives to justice, but its critics said it took its aggressive tactics too far. After the probe was shut down in February 2021, some prosecutors from the team continued their work in the organised-crime unit of Brazil’s federal prosecutors’ office.
Copyright SPH Media. All rights reserved.
