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Sembcorp Industries stands to benefit from US-China trade row: CEO

Q1 net profit rose 21% rise to S$93 million, on the back of improved performance from its energy business

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Group chief executive officer Neil McGregor told The Business Times on Wednesday that the trade row between the world's two largest economies has not hit the conglomerate, given that the water and waste management services it provides in China are essential services.

Singapore

SEMBCORP Industries (SCI) stands to gain from the ongoing US-China trade war as it is seeing an uptick in activities and electricity growth in Vietnam, which is benefiting from the relocation of more companies out of China into Vietnam, where Sembcorp Industries has a presence in industrial space and energy.

Group chief executive officer Neil McGregor told The Business Times on Wednesday that the trade row between the world's two largest economies has not hit the conglomerate, given that the water and waste management services it provides in China are essential services.

Instead, the group expects opportunities arising for its industrial space and energy in Vietnam.

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The energy, marine and urban development group posted a 21 per cent rise in first quarter net profit to S$93 million from S$77 million, on the back of improved performance from its energy (renamed from utilities) business.

Turnover for the three months ended March 31 fell 10 per cent to S$2.48 billion. While the conglomerate's energy and urban businesses continue to underpin its performance, this was offset by lacklustre showing in its marine business.

The poorer performance of its marine business was mainly due to lower revenue recognition from rigs and floaters and offshore platform projects.

The marine segment's net profit tumbled from S$2 million to just S$239,000. The group expects challenging market environment to remain, especially for the offshore and marine sector.

Earnings per share improved to 4.68 Singapore cents from 3.64 cents for the year-ago quarter. Net asset value per share as at March 31 stood at S$3.87, marginally higher than the S$3.80 as at Dec 31.

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On the impact of the trade spat, Mr McGregor said: "What you can see though is it does help the peripheral economies to China, like Vietnam, for instance. International companies tend to change the destinations of their businesses, and I think this is leading to a renaissance in the Vietnamese economy.

"And we are fairly well placed as an urban developer of industrial parks. We're seeing an uptick in activities there, we are also seeing an improvement in electricity growth as (the) economy expands in Vietnam."

Indeed, SCI saw strong demand for industrial land in Vietnam during the quarter.

It is also watching with interest the potential sale by the newly-appointed receivers of Hyflux's Tuaspring co-generation power plant. It had shown interest last year in Tuaspring.

Mr McGregor said: "We were once interested… We are keeping our options open. Naturally if the price was right, this may be of interest to us. But we have to wait and see what transpires..."

SCI was reportedly one of only two bidders pre-approved by national water agency Public Utilities Board last year as potential buyers of Tuaspring, but only SCI had submitted a final offer - said to be under book value of the plant.

SCI shares closed S$2.54, up one Singapore cent or 0.4 per cent on Wednesday after the financial results went public.