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Sembcorp's Q3 profit dips 12%; firm secures 25-year solar deal

The marine business suffered a net loss of S$18m for the quarter from a S$60.41m profit last year


LOSSES in the marine business owing to weak volumes and loss from a semi-submersible sale drove down Sembcorp Industries' third-quarter net profit by nearly 12 per cent to S$82.3 million from a restated S$93.1 million a year ago.

Turnover for the three months to Sept 30 jumped 36 per cent to S$3.02 billion, on the back of higher revenue from marine and utilities businesses.

Net profit from the utilities business - the group's key earnings contributor - rose over three-fold to S$91 million from the corresponding quarter a year ago while revenue rose 27 per cent to S$1.8 billion, led by operations in Singapore, China, India and the UK, said Sembcorp in its results announcement on Friday.

The Singapore operations, which are the largest net profit contributor, benefited from higher HSFO (high sulfur fuel oil) prices. Good wind season and prices aided higher volume in India while China's Changzhi water treatment plant and Chongqing SongZao both contributed positively.

The marine business was tough, swinging to a net loss of S$18 million for the quarter from a S$60.41 million profit in the same period last year, despite turnover improving 60 per cent to S$1.2 billion, thanks in a big part to the delivery of two jack-up rigs and revenue recognition for newly secured projects.

Urban development - the group's third core business which has a healthy total net order book of 388 hectares - continued to deliver steady profits, with contribution from Vietnam and China.

Earnings per share for the period came in at 3.98 Singapore cents versus 4.56 Singapore cents a year ago.

No interim dividend was recommended for the period under review as it is Sembcorp's practice to declare dividends on a biannual basis.

For the nine-month period, the conglomerate's net profit slipped 9.2 per cent to S$240.9 million on the back of a 38 per cent increase in revenue to S$9.12 billion. The group's nine-month scorecard accounted for 71 per cent of OCBC Investment Research's full-year net profit estimate and is in line with expectations.

Sembcorp expects the utilities to be on track to deliver a better performance in 2018 and this includes the India energy business which is also expected to be profitable for the year despite a weaker upcoming final quarter.

OCBC Investment Research analyst Low Pei Han attributed the relatively weak quarter to "seasonality effects and outage in part of plant which is covered by Business & Interruption insurance".

As for the marine segment, the group expects low activity and the trend of negative operating profit to persist for the foreseeable quarter.

Separately, the industrial conglomerate said it had secured a 25-year deal to install, own and operate solar panels on top of two Singapore facilities owned by one of the world's largest providers of products and services to the energy industry.

The rooftop solar farm will be one of Singapore's largest, with a total capacity of 6.2 megawatts peak and is expected to produce around 7,435 megawatt hours of power annually - enough to power over 1,500 four-room HDB flats for a year. The farm will also help to cut more than three million kilogrammes of carbon dioxide emissions a year, equivalent to taking about 680 cars off the road.

One of the two locations, in the Tuas area, will also house the largest solar installation on a single rooftop in Singapore so far, with more than 12,700 solar panels amounting to over 4.7 megawatts peak.

Sembcorp's group president and chief executive Neil McGregor said: "With this newest project, Sembcorp now has over 115 megawatts peak of solar power assets in operation and under development."

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