Results for 4Q/FY 2017
For the 12 months to December 31, 2017.
- Revenue of $2.39 billion.
- Net profit totalled $14 million.
- Liquidity improved with positive operating cash flow of $144 million.
Singapore, February 21, 2018: Sembcorp Marine posted Group revenue of $2.39 billion for the twelve months to December 31, 2017. This compares with $3.54 billion in revenue generated the previous year. 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 original customers.
Rigs & Floaters reported a turnover of $1.10 billion in FY 2017, a 42% decline from the $1.89 billion booked in the previous year on lower revenue from drillships, other rigs and floaters. Following the termination of five jack-up rigs contracts with their original customers during the year, 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 34% year-on-year to $732 million in FY 2017 from $1.12 billion in FY 2016 due to fewer projects on hand.
Repairs & Upgrades revenue totalled $471 million, a 3% year-on-year increase from $460 million in FY 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 FY 2017 was $61 million, while Operating profit for FY 2017 decreased to $20 million. Net profit for FY 2017 totalled $14 million, compared with FY 2016 net profit of $79 million. The reduction in profitability was due to lower overall business volume which impacted the absorption of overhead costs, and additional cost accruals made during Q4 2017 for floater projects, which are pending finalisation with customers. Non-operating gain on divestment of Cosco Shipyard Group and the disposal of Cosco Shipping Singapore stake (formerly Cosco Corp) was partially offset by provisions and impairment for associate and joint venture companies.
4Q 2017 versus 4Q 2016
On a quarterly basis, Group turnover for 4Q 2017 at $655 million was 21% lower compared with $830 million for the same period in 2016. The lower revenue was due to lower rig building revenue, fewer floater and offshore platforms projects.
The Group reported losses of $48 million at the gross level and $44 million at the operating level. This was due to lower overall business volume which impacted the absorption of overhead costs, and additional cost accruals made during Q4 2017 for floater projects, which are pending finalization with customers.
Sale of 9 jack-ups for US$1.3 billion
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. This was received during 4Q 2017. 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.
Agreement to sell semi-submersible
The Group also announced an agreement to sell the semi-submersible rig West Rigel to a buyer at a price of US$500 million. Under the terms of the agreement, the sale is subject to conditions precedent being met by both parties before the delivery of the rig and the payment of the price. Once the conditions are fulfilled, the buyer will take delivery of the rig, which will remain in the company’s yard for reactivation works.
Balance Sheet and Cash Flow
Net debt decreased, with net debt to equity at 1.11 times at end of FY 2017 compared with 1.13 times in FY2016 and 1.31 times at 9M 2017. Cash flow from operating activities (before working capital changes) was $203 million in FY 2017. Cash generated from operations was $144 million mainly due to receipts from ongoing and completed projects.
In 4Q 2017, cash generated from operations was $556 million, arising mainly from the upfront payment from Borr Drilling. A net loan repayment of $285 million was made in the quarter, and gross cash increased by $245 million.
The Board of Directors recommends the payment of a final ordinary one-tier tax exempt dividend of 1.0 cent per share (1.0 cent previously). Together with the 1.0 cent paid during the interim results, total dividend for FY 2017 is 2.0 cents, from 2.5 cents previously. The final dividend, if approved at the AGM on April 18, 2018, will be paid on May 11, 2018.
Global exploration and production (E&P) capex spending continues to show signs of improvement, underpinned by higher oil prices.
Offshore rigs utilization and day rates have stabilized, but rig orders recovery may take some time as the oversupply in most drilling segments has yet to re-balance.
The production segment remains encouraging and we are responding to increasing enquiries and tenders for innovative engineering solutions.
We continue to make progress in our efforts to develop and commercialise our Gravifloat technology for near-shore gas infrastructure solutions.
Demand for repairs and upgrades, especially for LNG carriers and cruise ships remains strong. Regulations on ballast water treatment requirements coming into force in the foreseeable future will further underpin the potential of this segment.
However, the immediate outlook remains challenging. It will take some time for capex spending to translate into new orders. Industry activities remain low and competition for orders remains intense. Sembcorp Marine will continue to further strengthen its balance sheet and actively pursue the conversion of enquiries into new orders.
For more information, please contact:
Ms Lisa Lee
Head of Investor Relations
Tel No: (65) 6262 7107
Mr David Wong
Head of Corporate Communications
Tel No: (65) 6262 8036
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