Singapore’s Sembcorp Marine (Sembmarine) has achieved a net profit of $215 million for the six months ended June 30, 2015, a decline of 15% compared with 1H 2014 as industry conditions continued to be weak on low oil prices and the sharp fall in global oil & gas capex spend.
According to Sembmarine’s report, Group turnover for six months ended June 30, 2015 decreased 6% year-on-year to $2.51 billion, which compares with $2.68 billion for the corresponding period in 2014. The company said the decline in revenue was due mainly to a fall in rig building and repair revenue booked, while offshore & conversion revenue was higher.
In 1H2015, Group EBITDA (earnings before interest, tax and depreciation) declined 3% year-on-year to $347 million, while operating profit fell 6% to $285 million, from $303 million in the previous corresponding period.
At the pre-tax level, Group profit of $271 million was 15% lower than the $318 million achieved in the previous year. Associate and joint venture income declined 91% year on year to $1.3 million.
Turnover for the Rig building sector declined 18% year on year from $1.67 billion to $1.38 billion in the six month period. The Group delivered the Helix semi-submersible Q5000, the Prosafe accommodation semi-submersible as well as one Hakuryu jack-up rig during the six months, with another 16 rigs in the work-in-progress stage.
Offshore and conversion revenue increased 27% from $657 million in 1H2014 to $833 million in 1H2015.
Ship repair revenue was 14% lower at $266 million in 1H 2015 compared with $308 million in the corresponding period in 2014 as average revenue per vessel remained low although the number of ships repaired increased.
2Q 2015 vs. 2Q 2014
On a quarterly basis, Group turnover for 2Q 2015 at $1.21 billion was 10% lower when compared with $1.34 billion for the same period in 2014.
Group gross profit of $199 million was 3% higher on year-on-year basis mainly due to higher offshore and conversion projects and repair segment earnings.
At the operating level, Group profit fell 5% year on year to $147 million on higher operating expenses of which fair value adjustments on financial instruments led to a loss of $16.9 million on mark-to-market adjustments on foreign currency forward contracts.
Group pre-tax profit was 17% lower at $136 million, on lower contribution from associates and joint ventures and higher finance costs. Group finance costs increased to $11.2 million from $3.6 million previously.
Net profit in 2Q 2015 declined 17% year-on-year to $109 million compared with $132 million in 2Q 2014.
According to Sembcorp Marine, the persistently low oil prices have escalated the ongoing cuts in global exploration and production capital expenditure. The company added that, as a result, some customers are deferring or seeking to defer the delivery of their ordered rigs on a lack of charter contracts.
In addition, while the new order outlook for offshore exploration vessels remains bleak, particularly in the jack-up segment which is in an oversupply situation, the Group has benefitted from its strategy to diversify its product offering in addition to drilling solutions.
“Brazil’s oil and gas industry remains fraught in uncertainty. We continue to engage with our customers to find the best way forward for our projects and to explore all options including slowing down construction,” Sembmarine said.
The Group has a net order book of S$10.9 billion. This includes S$1.35 billion in contracts secured since January 2015, the largest of which is the engineering and construction contract for the DP3 new semi-submersible crane vessel for Heerema Offshore Services B.V.
“While the Group faces many challenges ahead, we will continue to actively manage our balance sheet to maintain a healthy financial position,” the company concluded.