Sembcorp Industries' H2 financial results could be affected by planned shutdowns, other factors

THE second-half performance of mainboard-listed Sembcorp Industries (SCI) may not be as rosy as its first-half's, as there will be scheduled shutdowns of its plants for maintenance and other factors at play.

Group chief executive Wong Kim Yin said at an earnings call on Friday that SCI's first-half performance has seasonally been better than its second-half. This is because its UK operations generally do better during the winter period due to higher demand for its fast response and battery portfolio.

Also, SCI has planned shutdowns for plants in Singapore, Myanmar and India for maintenance works including overhaul in the second half ending December. These maintenance works could last 30 days to 45 days. The plants are not in a position to contribute when they are shut down. SCI declined to furnish details of the financial impact.

SCI also flagged that its underlying performance will be negatively impacted by changes in customer profile in the UK and Singapore.

SCI lost a major customer after the utility service agreement with Eastman Chemical Singapore ended in April, and the earnings for the second-half will not have this contribution, for example.

There will be a loss of income from divested assets in Panama and Chile, too.

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Moreover, there are potential downside risks in the conventional energy segment across markets due to higher market volatility as well as higher fuel costs.

Mr Wong, as a result, cautioned against extrapolating the second-half financial performance from the first-half of FY2021, for which SCI has posted a net profit of S$46 million. It incurred a net loss of S$42 million in H1FY2020.

The conglomerate managed earnings despite having made a S$212 million impairment to its 49-per-cent-owned China coal-fired power plant after its joint venture partner had to close all its coal mines following a government directive and hit with higher coal prices.

Turnover was S$3.3 billion, up 26 per cent year-on-year from S$2.6 billion.

SCI is transforming to acquire higher earnings contributions from its sustainable solutions portfolio: from 40 per cent in 2020 to 70 per cent (excluding exceptional items) by 2025.

The renewables segment (wind, solar and energy storage) and the integrated urban solutions segment (urban, water, waste and waste-to-resource) make up its sustainable solutions portfolio.

But for the first half, the sustainable solutions businesses contributed only 31 per cent of the bottom line. In particular, renewables was hit by low wind resource in India, and its net profit dipped by 27 per cent year-on-year to S$24 million.

Integrated urban solutions reported marginally 2 per cent lower earnings at S$63 million.

As it stands, the conventional energy segment - because of higher energy demand and margins in Singapore and India as well as good performance for UK flexible generation assets - was still the biggest contributor with S$185 million in net profit (up 46 per cent), excluding the S$212 million impairment.

Earnings per share came to 2.58 Singapore cents, compared to a loss per share of 3.31 cents for H1 FY2020.

Interim dividend per share is two Singapore cents, to be paid on Aug 24.

Shares of SCI were down three Singapore cents or 1.48 per cent to S$2 at market close on Friday, after the financial results were released.