31 Oct 2017

Results for 3Q/9M 2017

Key highlights:

For the 9 months to September 30, 2017

  • Revenue of $1.73 billion.
  • Gross profit totalled $109 million.
  • Net profit totalled $48 million.
  • Sale of 9 jack-up rigs to Borr Drilling for US$1.3 billion in early October 2017

 

Singapore, October 31, 2017: Sembcorp Marine reported Group revenue of $1.73 billion for the nine months to September 30, 2017. This compares with $2.71 billion in revenue in 9M 2016.  The lower revenue was largely due to lower sales from all key business segments with the exception of Repairs & Upgrades, as well as a reversal of previously recognised rig sales upon the termination of contracts with a customer.

Turnover for Rigs & Floaters was $690 million for 9M 2017, a 50% decline from the $1.39 billion booked in the previous nine-month period due to lower revenue from drillships, other rigs and floaters. Following the termination of two rigs contracts with a customer in 3Q 2017, there was also a reversal of sales from the projects. This was partially offset by revenue recognition from ongoing semi-submersible projects and the delivery of an FPSO.

Offshore Platforms revenue declined 32% year-on-year to $623 million in 9M 2017 from $916 million in 9M 2016 due to fewer projects on hand.

Repairs & Upgrades revenue totalled $352 million, a 1% year-on-year increase from $350 million in 9M 2016. While fewer ships were repaired, the average revenue per vessel was higher due to an improved vessel mix with more higher-value works.

Gross profit for 9M 2017 was $109 million, a 58% year-on-year decline.

Operating profit for 9M 2017 decreased 60% year-on-year to $64 million mainly due to lower contribution from rig building and offshore platforms projects, costs incurred for a floater project which is pending finalisation with the customer and the effects of contracts termination and inventories written down.

Net profit for 9M 2017 totalled $48 million, compared with 9M 2016 net profit of $45 million. The increase was mainly due to a gain on disposal of our stake in Cosco Shipyard Group Co., Ltd., lower impairment losses on available-for-sale financial assets and lower share of losses from associates and joint ventures. This was offset by $12.7 million in inventories written down following the sale of nine jack-up rigs to Borr Drilling.

Financial Highlights

 

3Q 2017 versus 3Q 2016

On a quarterly basis, Group turnover for 3Q 2017 at $317 million was 64% lower compared with $888 million for the same period in 2016. The lower revenue was due to lower rig building revenue, fewer floater and offshore platforms projects, and revenue reversal for two jack-up rigs which were terminated with a customer during the quarter.

For 3Q 2017, the Group made a profit of $12 million at the gross level and $22 million at the operating level mainly due to lower contributions from rig building and offshore platforms segments, and a $12.7 million write-down of inventories following the sale of nine jack-up rigs. Net profit for 3Q 2017 totalled $3 million.

 

Sale of 9 Pacific Class 400 jack-up rigs to Borr Drilling

On October 6, 2017, the Group announced it signed agreements for the sale of nine jackup rigs to Borr Drilling for US$1.3 billion. Under the terms of the Agreements, Borr Drilling will take delivery of the nine jack-up rigs progressively over a 14-month period, from 4Q 2017 to 1Q 2019.

Borr Drilling has made an upfront payment of about US$500 million. The balance amount of approximately US$800 million will be paid at any time within five years from the respective delivery dates of the rigs.

Borr Drilling will pay interest at market rates from the respective delivery dates of the rigs to full payment of the balance amount. The balance amount and all interest payable will be secured by a first priority mortgage over the rigs and a corporate guarantee from Borr Drilling Limited.

 

Balance Sheet and Cash Flow

Net debt increased during the year, with net debt to equity at 1.31 times at end of 9M 2017 compared with 1.13 times at end FY2016. Upon receipt of the upfront payment of US$500 million, net debt to equity is expected to improve significantly. Cash used in operations for 9M 2017 was $412 million mainly for working capital for ongoing projects. Net cash generated from investing activities was $70 million mainly due to proceeds from the divestment of our stake in Cosco Shipyard Group, offset by capital expenditure for Tuas Boulevard Yard and Estaleiro Jurong Aracruz (Brazil) Yard.

 

Outlook

Global exploration and production spending continues to show signs of improvement. Recent stabilisation of drilling rigs day rates and utilisation levels, coupled with increased activities in secondary rigs sales indicate a commencement of recovery in the drilling segment.  

Enquiries for non-drilling solutions continue to be encouraging. We have been actively responding to more enquiries and tenders for developing engineering solutions for the production segment.

Good progress has been made in the development and commercialisation of our Gravifloat technology for near-shore gas infrastructure solutions. 

For repairs and upgrades, niche markets in LNG carriers and cruise ships continue to underpin performance. We expect this trend to continue.

As we continue to strengthen our balance sheet and prudently manage our financial resources, Sembcorp Marine’s strategy remains focused on the pursuit of operational excellence, investing in new capabilities and technological innovation, and active customer engagement and business development to grow our order book and ensure the sustainability of our business.

For more information, please contact:

Analysts’ queries:  

Ms Lisa Lee
Head of Investor Relations
Tel No: (65) 6262 7107
Email: lisa.lee@sembmarine.com


Media queries:

Mr David Wong
Head of Corporate Communications
Tel No: (65) 6262 8036
Email: david.wong@sembmarine.com

 

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