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Sembcorp Q2 profit surges 46.8%, though marine unit still pressured

SEMBCORP Industries on Friday posted a second-quarter net profit of S$81.9 million, up 46.8 per cent from S$55.8 million last year, thanks to much higher contributions from its utilities and urban development businesses. 

Earnings per share stood at 3.94 Singapore cents versus 2.57 Singapore cents last year, and turnover rose 46.6 per cent to S$3.34 billion for the quarter. 

An interim dividend of two Singapore cents per ordinary share has been declared, which will be paid on Aug 31. 

Net profit from the utilities segment swelled 97.8 per cent to S$85 million, as the group's India operations delivered a S$39.4 million profit. Sembcorp's urban development business outperformed as earnings more than quadrupled to S$35.4 million from S$8.55 million last year. These were however partially offset by a S$33.7 million net loss from the group's marine business, reversing from a S$3 million profit previously. (see amendment note)

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For the half-year to June 30, the group's net profit fell 7.9 per cent to S$158.6 million, mainly due to losses from the group's marine and construction businesses. 

Excluding the group's marine business, net profit would have risen 30 per cent to S$190.5 million, Sembcorp noted. 

Earnings per share came in at 7.6 Singapore cents for H1 2018, down from 8.5 Singapore cents in the year-ago period. 

Meanwhile, turnover rose 39 per cent to S$6.1 billion. 

Utilities continues to be the key contributor the group's earnings, delivering a 58 per cent profit growth to S$155.3 million for the half-year period, with key markets Singapore and China performing well, and turnaround to profitability achieved in India, Sembcorp said. 

The urban development business also continued to deliver a steady profit of S$45 million, albeit down 2 per cent from last year. 

Nonetheless, the group's marine business continued to face a challenging environment. "Transformation efforts to move up the value chain have resulted in new business opportunities, but they require significant time and effort in project co-development with potential customers before orders are secured," Sembcorp said. 

For the six months to June 30, the group's marine business segment recorded a loss of S$31.9 million, versus a profit of S$25.6 million a year earlier, mainly due to lower overall business activities, and loss recognised from the sale of a semi-submersible rig. 

Said Sembcorp's group president and CEO Neil McGregor: "Our focus remains on lifting performance, supporting Marine as it moves up the value chain and repositioning Sembcorp Industries during an unprecedented period of technological and market disruption."

Looking ahead, Sembcorp expects the market environment to remain challenging this year. "While a broader-based global recovery is underway, rising trade and geopolitical challenges could potentially increase volatility and dampen global growth," said Sembcorp. 

Nonetheless, the group is confident that it has the right strategies and capabilities for the future, it said. 

As at 12.21pm on Friday, shares in Sembcorp Industries were trading at S$2.66 apiece, up 1.5 per cent or four Singapore cents, following the release of its financial results. 

Amendment note: Due to an editing error, an earlier version of this story said that Sembcorp's marine business posted a S$3 million loss for the year-ago quarter. Instead, the group made a S$3 million profit. The article above has been revised to reflect this.