DRILLING Drilling Featured News

SembMarine makes massive turnaround

A newly completed floating production, storage and offloading vessel at Sembcorp Marine’s Jurong Shipyard in Singapore. The rig-builder secured $320 million in new orders last year. Its net order book, excluding the Sete Brasil drillships,

Sembcorp Marine recorded a massive earnings turnaround in the fourth quarter to return to the black in spite of challenging conditions in the offshore and marine market.

The rig-builder posted a net profit of $34.3 million for the three months ending Dec 31 last year – a stark contrast to the net loss of $536.9 million in the same period a year earlier.

The improved earnings were due to smaller losses from associates and a gain on the disposal of a financial asset arising from the step-up acquisition of Gravifloat, SembMarine reported yesterday – although these were offset by higher finance costs and impairments of financial assets.

Turnover fell 37.5 per cent to $829.9 million, mainly due to lower revenue recognition for rig-building projects as customers deferred deliveries. Smaller contributions from offshore platform projects and a drop in revenue from repair businesses also dragged down overall revenue.

Net profit for the full year came in at $78.8 million, compared with a net loss of $289.7 million previously, while revenue dropped 28.6 per cent to $3.54 billion – the steepest fall on record and the lowest level since 2006, according to Thomson Reuters data.

Earnings per share for the quarter was 1.64 cents, a reversal from the loss per share of 25.7 cents previously. Net asset value per share stood at 122.62 cents as at Dec 31 last year, up slightly from 120.24 cents as at the same time a year earlier.

SembMarine has proposed a final dividend per share of one cent, lower than the two cents previously. This brings the total dividend for the year to 2.5 cents, down from six cents a year ago.

The group secured $320 million in new orders last year. Its net order book, excluding the Sete Brasil drillships, was $4.7 billion as at Dec 31.

President and chief executive Wong Weng Sun told a briefing yesterday that it has not taken additional impairment charges as “the current provisions are adequate under the present circumstances”.

SembMarine had set aside $329 million in provisions in 2015 for delinquent contracts for oil-rig supplier Sete Brasil, as well as a $280 million charge for prolonged deferment or possible cancellation of rigs.

Where rig delivery deferments are concerned, Mr Wong said the group has taken steps to protect its interests in two rigs for a customer, Perisai, which recently announced its insolvency. Both rigs have been completed, and are technically accepted by Perisai.

He said the group is still in discussion with Oro Negro regarding the deferment of its three jack-up rigs, which have also been completed and technically accepted.

It is still marketing North Atlantic Drilling’s West Rigel semi-submersible rig for a charter contract or for sale. The standstill agreement for the West Rigel rig delivery was recently extended to July 6 this year.

Restructuring efforts remained in place last year, including measures to cut operating costs by implementing salary freezes, said Mr Wong. The group shed between 3,000 and 4,000 employees in 2015, mostly foreign workers employed by sub-contractors.

“Despite the challenging outlook and intense competition, we believe that growth prospects for the offshore and marine industry remain positive in the medium to long term,” said Mr Wong.

“However, with increasing enquiries for non-drilling solutions, we foresee an earlier recovery in demand for fixed platforms; floating production, storage and offloading; and floating storage and offloading conversions; and new-builds in the next few years.

“Rising global demand for gas also augers well for our broad-based liquefied natural gas solutions and capabilities. We believe these are the key segments that will offer opportunities in 2017.”

SembMarine shares closed up one cent at $1.535 yesterday, before the results were announced.

The Original Posted by Jacqueline Woo/The Straits Times