Sembmarine hit by loss in Q3, cuts 8,000 jobs

Net loss for the quarter ended 30 September 2016 was recorded at SGD21.79m ($15.69m) as against the profit of SGD32.11m in the same period of 2015. The loss was due mainly to higher finance costs and share of losses of associates and joint ventures.

Revenue for the quarter dipped 21.4% year-on-year to SGD888m.

The rigbuilder and ship repair yard is keenly watching its cashflow and has implemented cost cutting measures including the reduction of about 8,000 jobs, comprising employees and subcontractors manpower.

“We have reallocated excess manpower from drilling to non-drilling work without compromising on safety and quality of execution. We have also terminated less efficient subcontractors and allow for natural attrition of our employees,” said Wong Weng Sun, president and ceo of Sembmarine.

“In addition to manpower optimisation, we have taken measures to reduce our operating costs by implementing salary freeze and adjustments to the variable remuneration components for management staff since 2015,” Wong added.

With the reduction of offshore exploration and production capex projected to continue into 2017, the demand outlook for the sector is likely to remain weak in the foreseeable future, especially given the existing excess supply of drilling rigs, and many yet-to-be delivered newbuild rigs awaiting customer charters.

For Sembmarine, the flow of vessels to its yards for repairs and upgrade is a key revenue generator, and LNG vessels and cruise ships also continue to be strong contributors, according to Wong.

The rigbuilding business has adversely affected, with Sembmarine needing to take steps to protect its interests in two rigs ordered by Malaysia’s Perisai Petroleum, which has declared its insolvency.

Deliveries of three rigs were deferred by Mexico’s Oro Negro, and a standstill agreement for the delivery of North Atlantic Drilling’s semi-submersible rig has been further extended to 6 January 2017.

In 2015, Sembmarine has made a provision of SGD280m for deferment and possible cancellation of all those rigs.

The group’s net orderbook at end-September 2016 stood at SGD8.4bn. Excluding the Sete Brasil’s seven drillships order, its net orderbook amounted to SGD5.2bn.

Sete Brasil filed for judicial restructuring in April this year, and Sembmarine followed with arbitration proceedings against various subsidiaries of Sete Brasil to preserve its interests under the drillship contracts. The arbitration proceedings are ongoing.

“Sembmarine has gone through several downcycles in the past and has built up a strong core to enable us to navigate these tough times,” Wong said.