SembMarine reports FY18 loss of $74 mil; Expects business environment to stay challenging

SINGAPORE (Feb 20): Sembcorp Marine posted earnings of $6 million for 4Q18 ended Dec, 95% lower than the restated $117 million earnings in 4Q17.

The drop in 4Q earnings was due to the continued low overall business volume, impairment of an asset and accelerated depreciation costs.

The $117 million earnings in 4Q17 was restated due to accounting changes on adoption of SFRS (I) from January 1, 2018 and mainly boosted by the net positive effects of contract termination of three rigs contracts and a one-off gain on disposal of Cosco Group shares recorded in 4Q17.

Group turnover for 4Q18 of $913 million was largely unchanged from the previous year. During the quarter, the group booked significant revenue from higher percentage recognition for ongoing production and drillship projects. This was offset by lower revenue from Offshore Platforms following the completion and delivery of the Culzean Platform Project earlier in the year.

For the FY18 ended Dec, the group posted a net loss of $74 million which included loss of $34 million on the sale of West Rigel rig.

Group revenue was $4.89 billion for the FY18 ended Dec 31, 2018 compared with the restated $3.03 billion generated in FY17.

On a segmental basis, revenue from Turnover for Rigs & Floaters came in at $4.15 billion in FY18, compared with $1.72 billion in FY17. The higher revenue was related to recognition of the Borr Drilling and BOTL jack-up deliveries, sale of West Rigel (Transocean Norge) semi-submersible rig, and revenue recognition for ongoing production and drillship projects.

Offshore Platforms revenue was $184 million in FY18, lower than the $732 million in FY17 due to fewer contracts on hand, and completion of existing projects.

Revenue from Repairs & Upgrades totalled $476 million in FY18 compared with $499 million in FY17 on fewer ships repaired. A total of 296 ships and other vessels were repaired or upgraded in the 12 months compared with 390 units in FY17. Average revenue per vessel was higher at $1.61 million compared with $1.28 million on improved vessel mix of higher-value works.

Net debt totalled $3.39 billion, with net debt to equity at 1.44 times as at Dec 31, 2018. Operating cash flow generated before working capital changes was $157 million in FY18 compared with $489 million in FY17.

In light of the challenging business environment. SembMarine said no interim and final dividend has been declared for FY18. For FY17, total dividend was 2.0 cents per share.

In its market outlook, SembMarine said global capex spend for offshore exploration and production (E&P) is expected to improve further. While offshore drilling activities have increased, offshore rig orders will take some time to recover as the market remains over-supplied while ship repairs and upgrades segment remains intensely competitive.

Overall business volume and activity for the group, while stabilising, is expected to remain relatively low.

“We will continue to take steps to manage our costs, cash flows and gearing to address our balance sheet and to capitalise on new business opportunities,” says SembMarine.

Shares in SembMarine closed 1 cent lower at $1.58 on Tuesday.