Sembcorp flags S$212m impairment for H1

Tan Nai Lun

Published Mon, Aug 2, 2021 · 08:22 AM

SEMBCORP Industries U96 : U96 0%has flagged an impairment of S$212 million for its H1 2021 financial results, although it expects net profit will remain positive, the conglomerate said in a bourse filing on Monday.

In its profit guidance, Sembcorp said its 49 per cent-owned joint venture (JV) Chongqing Songzao Sembcorp Electric Power will likely record a net loss for the half-year ended June 30, and for the full year 2021.

Lim & Tan Securities on Monday also downgraded its call on the counter to "hold", after taking into account the latest profit warning and the stock's recent performance.

The JV, which operates a coal-fired power plant in Chongqing, China, had to procure coal from other provinces, after its JV partner Chongqing Energy Investment Group closed all its Chongqing-based coal mines following a government directive in January for coal mines in Chongqing to re-evaluate their coal mine operations, the group said.

The asset had been hit with higher coal prices, due to low coal inventory in China amid restrictions on coal production combined with continued high demand, and uncertain and insufficient government support, the group added.

Sembcorp also expects the group will face competitive pressure from low carbon power sources in the longer term.