25 Oct 2018

Sembcorp Marine Results for Third Quarter and Nine Months to September 30, 2018

Key highlights:

For the nine months to September 30, 2018

  • Group revenue of $3.97 billion, including sale completion of West Rigel rig for US$500 million
  • Net loss of $80 million, including loss of $34 million on the sale of West Rigel rig
  • $730 million in new contracts secured in 9M 2018
  • Net order book of $6.39 billion to-date

    Singapore, October 25, 2018: Sembcorp Marine posted Group revenue of $3.97 billion for the nine months to September 30, 2018. This compares with $2.12 billion in revenue generated in 9M 2017 (restated for accounting changes on adoption of SFRS (I) – see Note A below).

    The higher revenue in 9M 2018 was largely due to revenue recognition on delivery of 6 jack-up rigs to Borr Drilling, 1 jack-up rig to BOTL, the sale of the West Rigel semi-submersible rig (renamed Transocean Norge) and higher percentage recognition for ongoing drillship and offshore production projects in 9M 2018.

    On a segmental basis:

    • Turnover for Rigs & Floaters was $3.40 billion in 9M 2018, compared with $1.08 billion in 9M 2017. 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, as well as higher floaters revenue on percentage recognition of the ongoing Johan Castberg FPSO, Shell Vito FPU and Karish FPSO projects, and ongoing revenue recognition from the Transocean drillships.
    • Offshore Platforms revenue was $172 million in 9M 2018, lower than the $623 million in 9M 2017 due to fewer contracts on hand. During the second quarter, revenue from the remaining work for the three topside modules for the Culzean platform topsides were booked on their scheduled delivery in June 2018.
    • Revenue from Repairs & Upgrades totalled $336 million in 9M 2018 compared with $355 million in 9M 2017 on fewer ships repaired. A total of 230 ships and other vessels were repaired or upgraded in the nine months compared with 328 units. Average revenue per vessel was higher on improved vessel mix of relatively higher-value works.

    Excluding the sale of West Rigel and rig deliveries to Borr Drilling and BOTL, Group revenue for the 9M 2018 would have been $1.8 billion, down 9 per cent year-on-year from $2.0 billion in 9M 2017. Revenue adjustments were also made in 9M 2017 due to the termination of two rig contracts with a customer last year.

    The Group posted 9M 2018 operating loss of $54 million, and a net loss of $80 million due to (i) continued low overall business activities and (ii) the sale of West Rigel at a loss of $34 million. This compares with a net profit of $143 million in 9M 2017, partly due to last year’s gain of $47 million from the sale of investment in Cosco Shipyard Group and the net positive effect of contract termination of two rigs last year of about $98 million (restated for accounting changes on adoption of SFRS (I)). (Please refer to table below)

    Note A: The Group has adopted Singapore Financial Reporting Standards (International) (SFRS(I)) from 1 January 2018.

     

    Effects of Non-recurring items:

    Financial Highlights



    3Q 2018 versus 3Q 2017

    On a quarterly basis, Group turnover for 3Q 2018 of $1.17 billion compares with $729 million in 3Q 2017. The higher revenue was due to higher percentage recognition of the two Transocean drillships, the Johan Castberg FPSO, Shell Vito FPU and Karish FPSO projects, as well as recognition of 2 additional jack-up rigs delivered to Borr Drilling. This was offset by lower revenue from Offshore Platforms following the completion of the Culzean Project earlier this year.

    The net loss of $30 million incurred in 3Q 2018 was due to the continued low overall business volume. This compares with the $101 million in net profit in 3Q 2017, which was mainly boosted by the positive effects of contract termination of two rigs last year of about $98 million (restated for accounting changes on adoption of SFRS (I)).


    Balance Sheet and Cash Flow

    Net debt totalled $3.26 billion, with net debt to equity at 1.37 times as at 30 September 2018 compared with 1.13 times as at end FY2017 and 1.41 times as at end 3Q 2017. Operating cash flow generated before working capital changes was $89 million in 9M 2018. Cash used in operations in 9M 2018 was $101 million, mainly due to working capital for ongoing projects, offset by receipts from ongoing and completed projects.


    Market Outlook

    Capex spend on global exploration and production (E&P) is expected to continue to improve with firmer oil prices seen in the nine months of 2018.

    While offshore drilling activities have shown initial signs of improvement, offshore rig orders will take some time to recover as the market remains over-supplied.

    The majority of recent new offshore oil and gas orders were for production projects. This trend is expected to continue and Sembcorp Marine is responding to an encouraging pipeline of enquiries and tenders for innovative engineering solutions.

    Competition in the repairs and upgrades segment remains intense. The segment will be underpinned by regulations that require ballast water treatment systems and gas scrubbers to be installed over the next two to five years.

    Challenges in the offshore and marine sector persist, notwithstanding the improved industry outlook.  It will take some time before we see a sustained recovery in new orders, while competition remains intense and margins compressed.

    Overall business volume and activity for the Group is expected to remain relatively low for the immediate quarters. The trend of negative operating profit is expected to continue for the foreseeable quarter. Our cash resources remain sufficient and we will continue to prudently manage our costs and cash flows to align them with business volume and potential opportunities.

     

    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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