Sembcorp's Q4 profit up 7.5%, boosted by gains in utilities business

Singapore

DESPITE the trying time for the oil services sector, following the steep plunge in crude prices, Sembcorp Industries, one of the world's largest rig-builders, achieved a profit rise for its fourth-quarter earnings - buoyed by gains from its utilities business.

For the three months ended Dec 31, 2014, Sembcorp's net profit grew 7.5 per cent to S$240.62 million, mostly due to higher contributions from its utilities business in China and the UK, which contributed to a 44 per cent gain in the segment's earnings to S$109.40 million.

Over the quarter, net profit from its marine business fell 4 per cent to S$105.91 million, mainly on the back of a tax writeback in Q4 FY13. Meanwhile, net profit from its urban development business plunged 60 per cent to S$15.08 million, mostly due to lower contribution from its Nanjing Eco Hi-tech Island project.

For the full financial year, Sembcorp's net profit was down 2.4 per cent at S$801.10 million, mainly as FY13's earnings included gains from the initial public offering (IPO) of Sembcorp Salalah Power & Water Company (Salalah), the group's joint venture in Oman. The gains were partially offset by an impairment made for its operations in Teesside, UK.

Excluding these significant items, Sembcorp's utilities business recorded a 7 per cent net profit growth in FY14 to S$407.95 million.

While Sembcorp achieved a rise in earnings amid tough market conditions, its turnover fell.

In the fourth quarter, the group's turnover fell 10.4 per cent to S$2.66 billion, mainly due to lower revenue recognition for its rig building projects.

Revenue from Sembcorp's marine business tumbled 15 per cent to S$1.44 billion, while revenue from its utilities business fell 5 per cent to S$1.17 billion on lower high sulphur fuel oil prices. Turnover contribution from its urban development business was down 26 per cent at S$1.73 million.

Meanwhile, Sembcorp's FY14 revenue inched up one per cent to S$10.89 billion, mainly from the higher revenue recognition for the group's rig building projects in the first three quarters as well as offshore and conversion projects.

Following Salalah's IPO in September 2013, Sembcorp's shareholding in the former was reduced from 60 to 40 per cent, thus leading to the deconsolidation of Salalah's financials from Sembcorp's turnover, gross profit and finance costs. In July 2014, Sembcorp also increased its interest in Thermal Powertech Corporation India from 49 to 65 per cent, which led to the consolidation of the latter's financials into Sembcorp's financial statements.

Sembcorp's marine business continues to face tough competition in upcoming tenders in the offshore exploration and production sectors, as oil and gas majors announced capital expenditure cuts and deferred planned projects, the group said in a statement on Tuesday, adding that the performance of its marine business in 2015 will be supported by its orderbook.

In 2015, Sembcorp also expects a challenging utilities business in Singapore due to intense competition in the power market as well as low oil prices.

For the three months ended Dec 31, 2014, Sembcorp's earnings per share stood at 13.33 cents while net asset value per share was S$3.15. A final dividend of 11 cents per share was proposed for the quarter.

On Tuesday, Sembcorp's counter was 0.47 per cent lower at S$4.20, down 22.94 per cent from early-June last year, before crude prices embarked on their steep descent.