Sembmarine reports loss of S$647.2m for H1, but company sees improvement in H2

SEMBCORP Marine posted a loss of S$647.2 million for the first half of FY2021, widening from a loss of S$192.1 million in the corresponding year-ago period. But company executives said losses can be expected to narrow in H2, barring unforeseen circumstances.

The losses in H1 were mostly attributable to S$472 million worth of provisions. Of these provisions, S$361 million was for labour and other costs that are likely to be incurred over the next six to 18 months to complete existing projects. Other provisions included S$65 million for the reinstatement of yards, and asset impairment losses of S$46 million.

Work at Sembmarine's yards has been disrupted by manpower issues resulting from Covid-related restrictions on bringing workers into Singapore.

In order to minimise further delays to project completions and to avoid cancellations of these projects, Sembmarine has had to actively source for skilled workers from alternative sources.

Excluding these provisions, Sembmarine's loss for H1 would have been S$175 million.

In a call with reporters and analysts to discuss the company's latest earnings, Sembmarine's finance director William Goh said the company does not foresee the need for operational provisions in H2 for its existing projects.

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Sembmarine's revenue for the first half of the year fell 6.8 per cent to S$844.2 million, from S$906.2 million in the year-ago period, on the back of disruptions due to the Covid-19 pandemic that caused delays in the execution and completion of existing projects.

Loss per share for the period came in at 5.16 Singapore cents, down from 8.83 cents in the corresponding period last year.

As at end-June, Sembmarine's net order book stood at S$1.78 billion. This comprised S$1.56 billion of projects under execution and S$0.22 billion of ongoing repairs and upgrades projects with firm deliveries in 2021.

Sembmarine has a total of 16 projects under execution currently, with five scheduled for completion in 2021 and nine in 2022. The remaining two will be completed by 2025.

Chief executive Wong Weng Sun said the group is also "actively tendering" for more than 10 projects, and has not seen any cancellations of existing ones as at end-June.

He stressed, however, that the challenges faced by the group due to the pandemic are "real and severe", and have lasted longer than anticipated.

This, he said, means that the S$0.6 billion of net cash proceeds raised from the rights issue last year is now insufficient. The group has already used S$0.43 billion of this amount for working capital purposes.

"It has progressively become evident that the impact of Covid-19 pandemic and the industry downturn has been more protracted than originally anticipated," said Mr Wong.

Sembmarine had on June 24 announced a S$1.5 billion rights issue to address its "immediate funding needs" and strengthen its financial position.

Mr Goh said the S$1.5 billion rights issue was based on the group's projected operational needs till the end of 2022, which means the probability of an additional rights issue before that is unlikely.

Phillip Securities analyst Terence Chua expects Sembmarine's near term liquidity to be affected as loans mature over the next 18 months. But he, too, is more optimistic about H2.

"Sembmarine has also made additional inroads into the renewable energy sector, with green energy solutions now comprising a third of its net order book," he said. "Overall, there was little surprise from the results, and we expect the road to recovery to remain protracted."

Shares in Sembmarine closed at 10.8 Singapore cents on Thursday prior to the results announcement, down 1.8 per cent or 0.2 cent.