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Sembmarine sees profit cut, expects slight market improvement

Singapore's Sembcorp Marine saw its first half profit plunged by 34.8% year-on-year as the global offshore operating conditions continue to be challenging, but president and ceo Wong Weng Sun has noted a gradual improvement in rates and utilisation levels.

Net profit for the first half was recorded at SGD43.28m ($31.86m), down by 34.8% from SGD66.34m in the same period of last year. First half revenue dipped by 22.5% year-on-year to SGD1.42bn.

“Overall performance was impacted mainly by lower contributions from rigbuilding and offshore platform projects,” Wong said.

The earnings in the first half were also dragged down by foreign exchange loss of SGD30.47m, though the forex loss was narrowed from the year-ago loss of SGD52.25m.

“Operating conditions in the offshore and marine sector continue to be challenging. While offshore day rates for drilling rigs appear to have stabilised and utilisation levels have begun to improve, a more robust recovery will take longer,” Wong said.

With no new contracts won in the second quarter, Sembmarine's year-to-date contracts have all come from the first quarter, worth SGD75m from the offshore platforms and floaters segments or non-drilling solutions. The group's net orderbook as at 30 June 2017 stood at SGD6.7bn with deliveries and completion stretching until 2020. Excluding the Sete Brasil's seven drillship orders, its net orderbook stood at SGD3.6bn.

Wong maintained that the SGD329m in provisions made in 2015 for the Sete Brasil contracts remain sufficient. “Sete Brasil continues to be in discussions with creditors on its judiciary recovery plan. We understand that a general meeting of creditors is scheduled in August 2017,” he said.

Sembmarine has been relying on the repair business to generate a constant source of income, recording 239 repairs and upgrades in the first half.

The protracted industry downturn has led to Sembmarine axing more than 8,000 job and adopting a freeze on salary for key management staff since 2015. In 2017, the wage freeze will be carried out across the board for all employees, and a 10% monthly variable component wage cut has been implemented for senior management staff.

Meanwhile, with the completion of Sembmarine's new Tuas Boulevard Yard (TBY) phase 2 during the first quarter this year, the group is now planning to return the Tanjong Kling Yard ahead of its lease expiry date, which cannot be disclosed, according to Wong.

“The actual expiry date is some years away but our plan is to return the (Tanjong Kling) yard sooner though it will not be in the immediate two to three years,” Wong said.

Sembmarine has already returned the Pulau Samulun Yard to the Singapore government and will return the Shipyard Road Yard and the Tuas Road Yard in 2017.

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