Sembcorp Marine reports lower profits

NOVEMBER 5, 2012 — Sembcorp Marine’s order backlog is at a record high of Singapore $12.1 billion. However, in the first nine months of this year, the Group’s net profit was S$371 million— 29 percent down on the S$523 million net for the same period in 2011. On a quarterly basis, the third quarter of 2012 net profit was S$116 million on the back of lower turnover at S$892 million, attributable mainly to lower revenue and margin recognition. Overall, Group turnover for the first nine months of 2012 was S$3,052 million, 3 percent higher as compared with S$2,963 million for the same period in 2011.

FINANCIAL HIGHLIGHTS

For the rig building sector, turnover in the third quarter of 2012 at S$428 million was 52 percent lower as compared with S$884 million in 2011.

The period saw one jack-up rig, the third jack-up from Noble, achieve initial percentage of completion revenue recognition as compared with 2011 which saw the resumption of revenue recognition for one semi-submersible unit, the Songa Eclipse, upon its completion and delivery in the third quarter of 2011. On a nine month basis, turnover at S$1,486 million in 2012 was 7 percent lower as compared with the same period in 2011.

The ship conversion/offshore sector in the third quarter of 2012 registered a 29 percent increase in turnover to S$300 million as compared with S$232 million for the same period in 2011. The sector saw one project, the conversion of FSO Banyu Urip, achieving major revenue recognition with six other projects in varying stages of construction and five units in the planning stage. On a 9M 2012 basis, turnover was 26 percent higher at S$1,065 million as compared with S$847 million in 2011.

For the ship repair sector, turnover in the third quarter of 2012 was S$153 million, 13 percent lower as compared with S$175 million for the corresponding period in 2011, attributable to timing of ship repair projects. For the first nine months of 2012, turnover was S$474 million as compared with S$485 million for same period in 2011.

Group operating profit in the third quarter of 2012 at S$126 million was 40 percent lower as compared with S$211 million for the same period in 2011. The third quarter of 2012 witnessed one unit of jack-up rig achieve initial recognition as compared with the same period in 2011 which saw the resumption of revenue and margin recognition of a semi-submersible rig, the Songa Eclipse, upon its completion and delivery in the third quarter of 2011. At 9M 2012, operating profit was S$406 million versus S$536 million in 2011.

On a pre-tax level, Group profit at S$139 million in the third quarter of 2012 was 49 percent lower as compared with S$275 million for the same period in 2011. For the first nine months of 2012, it was S$467 million as compared with S$637 million in 2011.

Earnings per share for the Group were 17.81 cents with return on equity at 21.1 percent.

OUTLOOK

The Group has secured contract orders worth a total of S$9.1 billion since the start of the year, growing the Group’s net order book from S$5.1 billion as at end 2011 to a record high of S$12.1 billion, with completion and deliveries extending till 2019. The Group remains focused on operational efficiency, productivity improvements and the timely deliveries of these record orders to our customers.

The global economy remains fragile and uncertain. Offshore exploration and production (E&P) spending continues to remain buoyant with discoveries in frontier areas and around the primary deepwater basins of the U.S. Gulf of Mexico, Brazil, East and West Africa and Nigeria.

Although the market environment for shipping remains challenging, says Sembcorp Marine, there is continued demand for repair and life extension work for LNG carriers as well as repair and upgrading work for cruise ships and offshore vessels. Demand for the Group’s big docks remains strong with the yards’ Alliance/FCC and longterm customers providing a stable base-load.

Overall, enquiries continue to be healthy, although competition remains keen and affects margin.