Sembcorp Marine expects significant H2 loss with supply chain crunch

SEMBCORP Marine (Sembmarine) S51 expects to post "significant losses" in H2 ending Dec 31, 2021, potentially in the range of the S$647 million loss in the first six months of the year, the company announced in a bourse filing on Tuesday (Oct 19).

This is mainly due to the increased costs to complete its projects, as well as the losses arising from the added delays. Even though Sembmarine has made some headway in managing project completion delays, the pandemic continues to impact performance.

Key challenges are delays in the delivery of equipment arising from border controls in some countries; purchase of new components requiring a longer lead time due to supply chain constraints; and slower than expected recruitment of additional skilled labour.

Sembmarine has also been hit by the continuing attrition of skilled workers and work disruptions, including stop work orders, due to measures to contain the pandemic.

Of its 16 projects under execution, five have been further delayed by between one and three months. The company expects to incur cost overruns of a "material amount". It is currently in talks with counterparties to mitigate the overruns.

Sembmarine will only be able to quantify the actual losses closer to the end of the year, depending on its Q4 performance. The magnitude of losses incurred will depend the continuing impact of Covid-19 measures on the construction progress of the projects, including the availability of labour, the health of workers and supply chain delays.

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Other factors include the outcome of ongoing negotiations to revise delivery dates; and the possibility of unexpected disruptions due to factors beyond the company's control.

"As the Covid-19 pandemic persists, the group continues to face serious challenges and risks. However, the group is determined to ride through this difficult period; and remains committed to completing its projects and doing its best for its customers and stakeholders," Sembmarine said in its filing.

Appealing for the support and patience of stakeholders, it added: "The group continues to believe that its ongoing strategic diversification and expansion into the clean energy sector will provide a foundation for it to achieve sustainable growth".

Shares of Sembmarine closed at S$0.081 on Tuesday, down 1.2 per cent.