Sembcorp Q4 profit down 85%; plans to list India energy business

SEMBCORP Industries on Friday revealed plans to list its India energy business and to reposition its utilities arm as it posted an 85 per cent drop in net profit.

For the three months ended Dec 31, 2017, the utilities, marine and urban development group posted a net profit of S$22.8 million. Earnings per share (EPS) stood at 0.62 Singapore cent, down from 7.71 Singapore cents a year ago.

The decline in net profit was mainly due to losses reported by its marine businesses and lower contribution from its utilities segment.

For the full year ended Dec 31, 2017, net profit fell 41.6 per cent to S$230.8 million. EPS stood at 10.51 Singapore cents for fiscal 2017, down from 19.92 cents for fiscal 2016.

Despite the lower net profit, Sembcorp recorded a 4.8 per cent increase in its revenue to S$2.1 billion for Q4 2017. The increase was attributed to higher sales from the utilities segment, partially reduced by lower turnover from the marine business.

Revenue for fiscal 2017 was up 5.5 per cent to S$8.3 billion.

A final dividend of two Singapore cents per ordinary share is proposed. Together with an interim dividend of three cents per ordinary share paid in August 2017, this would bring the group's total dividend for the year to five cents per ordinary share, Sembcorp said.

Sembcorp closed 12 Singapore cents lower at S$3.27 on Thursday.

On Friday, Sembcorp also announced that it has initiated the process for an initial public offering (IPO) of Sembcorp Energy India on BSE Limited and the National Stock Exchange of India, with the filing of a draft red herring prospectus.

The company said that the move is to build a platform for growth and sustainability of its India energy business.

Following the review of its utilities business, the group said that it is planning to divest "a number of peripheral utilities assets".

Over the next two years, the move is expected to deliver estimated cash proceeds of up to S$0.5 billion, which serve as additional to potential proceeds from the proposed IPO of Sembcorp Energy India.

Sembcorp also said on Friday that its wholly owned subsidiary, Sembcorp Utilities (Netherlands) NV, has entered into an agreement to divest its 100 per cent stake in Sembcorp Utilities South Africa, its 100 per cent effective stake in Sembcorp Silulumanzi, and its 73.4 per cent stake in Sembcorp Siza Water to South African Water Works Pty Ltd.

South African Water Works is a consortium of a South African infrastructure fund and other strategic investors, Sembcorp said.

Gross proceeds from the sale will amount to 790 million South African rand (S$89 million). Completion of the divestment is expected in the first half of 2018, subject to certain conditions.

Neil McGregor, group president and CEO, Sembcorp, said that 2017 was a "challenging year for our business sectors".

"We fully recognise the challenges we face, and are committed to addressing them head-on to lift our performance and returns. These challenges, together with market and industry disruptions, offer the opportunity for us to take decisive steps and reposition Sembcorp for success in a rapidly changing world," he added.