Sembcorp Industries flags S$245m impairment for Q4 results

CONGLOMERATE Sembcorp Industries (SCI) has issued a profit guidance for its financial results for the fourth quarter ended last December and the fiscal year, flagging an impairment of S$245 million.

In a statement to the Singapore Exchange after trading hours on Thursday, SCI said its energy business is "expected to make a net loss" in that quarter but did not specify if the conglomerate would be in the red for the period. However, SCI expects its energy business to be profitable for the full year and outperform the preceding year if the exceptional items including the impairment are excluded.

It will release its financial results on Feb 21.

SCI's statement comes after a periodic assessment of the recoverable amounts was performed on expected future cash flows of its energy assets.

The S$245 million impairment was a result of a S$158 million write-down of its UK Power Reserve assets, a S$64 million reduction in value after the divestment of its Chilean water business and a S$23 million impairment of its China wastewater treatment assets.

Separately, Sembcorp Utilities units have agreed to sell all their stakes in the water business in Chile for 27.8 billion pesos (S$50 million) to Spanish construction and engineering service group SACYR S.A.

The net asset value of the assets to be sold is S$107 million. Hence, arising from the divestment, an impairment of S$64 million will be booked due to the difference between the sale value and the net asset value of the business. In addition, a currency-translation loss recognised in the foreign currency translation reserve will be taken to profit and loss upon completion of the sale in 2020. As at end-December last year, the accumulated currency-translation loss was S$30 million.

Earnings per share and net tangible asset per share impact due to the impairment are 5.32 Singapore cents and 2.86 Singapore cents respectively, assuming that the transaction is completed as at Jan 1, 2019 for the former and as at Dec 31, 2019 for the latter.

SCI shares closed up 1.89 per cent or four cents to S$2.16 on Thursday before the announcement.