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Sembcorp posts 34% fall in Q1 profit; says market environment remains challenging

SEMBCORP Industries (Sembcorp) on Thursday reported a 34.1 per cent fall in net profit to S$76.65 million for the first quarter ended March 31, 2018, despite a 30 per cent rise in revenue to S$2.76 billion.

The earnings drop was mainly due to the absence recorded in the year-ago period of a one-off gain for the disposal of Cosco Shipyard Group and profit from the sale of a 42.6-hectare land in Nanjing, China; as well as lower contributions from offshore platform projects, said Sembcorp.

No dividend was recommended for the period.

Turnover was S$1.2 billion for Sembcorp's marine segment, which was S$435 million higher than the previous year as a result of higher revenue recognition for rigs and floaters upon the delivery of three jack-up rigs.

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Utilities continued to be Sembcorp's key net profit contributor, with this business' net profit rising 27 per cent from last year to S$70.3 million on a S$1.5 billion turnover. This came on the back of higher HSFO (high sulfur fuel oil) prices and a larger contribution from India and its Changzhi water treatment plant, which commenced operation in September 2017.

As a result of the fall in overall net profit, the group clocked earnings per share of 3.64 Singapore cents, down from 5.98 Singapore cents a year ago.

The market environment is expected to remain challenging in 2018, Sembcorp said.

"A broader-based global recovery is underway, aided by a rebound in investment and trade. As the group repositions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery," it said.

Sembcorp said its marine business has secured new orders worth S$476 million in the first quarter of 2018, and has a net orderbook of S$7.7 billion as of April 25, 2018.

It expects its utilities business to deliver better performance in 2018, boosted by an expected turnaround to profitability for its India energy operations. The segment will focus on long-term growth along its gas and power; renewables and environment; and merchant and retail business lines.

As to its urban development business, Sembcorp said it has a healthy orderbook, with income contribution expected from the sale of property developments in China and Vietnam.

Sembcorp's shares were trading at S$3.03 apiece as at 9.37 am on Thursday, down S$0.04 or 1.3 per cent.