Sembcorp posts 11.6% lower 3Q earnings of $82.3 mil on higher expenses

SINGAPORE (Nov 2): Sembcorp Industries announced 11.6% lower 3Q18 earnings of $82.3 million compared to $93.1 million a year ago, due to higher expenses incurred mainly from provision for fines.

Turnover for the quarter was $3 billion, up 36.3% from $2.2 billion in 3Q17 on contribution growth from the utilities and other businesses.

Utilities continued to be a key contributor to the group’s topline, registering a net increase in turnover due to higher revenue in Singapore, which benefitted from higher High Sulphur Fuel Oil (HSFO) prices; higher volume and prices for India; higher generation from Teesside and contribution from UK Power Reserve (UKPR); and contribution from Changzhi water treatment plant in China.

The marine business registered a loss of $17.9 million compared to its $60.4 million profit in 3Q17, which the group attributed to the sale of a semi-submersible as well as continued low overall business volume which impacted the absorption of overhead costs.

Excluding the effect of the delivery and sale of two jack-up rigs, and revenue adjustments made in 3Q17, the segment’s turnover would have grown 27%.

General and administrative expenses notably grew 49.2% to $132.8 million from $89 million in 3Q17, largely because of higher personnel and related costs attributed to Sembcorp’s digital transformation of its business as well as transaction and integration costs for UKPR.

In 3Q18, an additional provision for fines of $25 million was made for the alleged discharge of off-specification wastewater at one of Sembcorp’s overseas water business.

Going forward, Sembcorp expects the market environment to remain challenging for the remainder of the financial year, especially since downside risks to global growth have risen against rising trade and geopolitical challenges. The group says it nonetheless remains confident that it has “the right strategies and capabilities for the future.”

“Our focus continues to be on lifting performance and investing in capabilities in line with our strategy to reposition in a rapidly changing global energy market,” says group president and CEO Neil McGregor.

Shares in Sembcorp closed 1 cent higher at $2.84 on Thursday.