Sembcorp Industries posts 25% fall in Q1 profit, sees protracted oil & gas downcycle

SEMBCORP Industries on Wednesday posted a 25 per cent fall in net profit for the first quarter, after a sharp increase in finance costs, and weaker gross profit amid the oil rout. It also expects a more protracted downcycle in the oil-and-gas industry, compared to previous cycles.

Net profit for the three months ended March 31, 2016, stood at S$107 million, down from S$142 million in the same period a year ago.

Gross profit fell 6.9 per cent from a year ago to S$269 million, dragged by weaker operations linked to rig building projects.

Its finance costs more than doubled to S$86.2 million from S$31.2 million, which was mainly due to its utilities business in India, which became operational in the second quarter of 2015, as well as higher bank borrowings for its marine business.

"The global oil and gas industry continues to be volatile and uncertain," the company said in a press statement. It noted that Sete Brasil, a key client, has filed for judicial recovery.

"Sembcorp Marine believes this down cycle is likely to be more protracted than previous cycles. Whilst maintaining its cautious outlook, Sembcorp Marine is prepared not just to overcome these challenges but to lay stronger foundations for the future when the market recovers."

It said Sembcorp Marine will continue to actively manage its balance sheet, and remains optimistic of the longer term prospects for its business.