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Sembcorp Marine suffers S$537m Q4 loss on Brazil woes

SINGAPORE — Sembcorp Marine, the world’s second-largest oil rig builder, has suffered its first quarterly loss in at least 12 years after it booked large impairment charges and provisions, as plunging oil prices pushed customers to delay or cancel orders for offshore drilling projects.

SINGAPORE — Sembcorp Marine, the world’s second-largest oil rig builder, has suffered its first quarterly loss in at least 12 years after it booked large impairment charges and provisions, as plunging oil prices pushed customers to delay or cancel orders for offshore drilling projects.

Net loss in the fourth quarter ended Dec 31 totalled S$536.9 million, the firm said in an aftermarket statement yesterday, compared with the S$174 million net profit in the corresponding period a year earlier. It was the first quarterly loss since Sembcorp Marine started reporting data in 2003, after it took impairment charges and provisions of S$609 million, of which S$329 million related to the troubled Sete Brasil. Revenue for the quarter slumped 8.2 per cent to S$1.3 billion.

“Sembcorp Marine views these provisions as prudent and necessary under present circumstances … Looking ahead, this down cycle is expected to be more protracted than previous cycles,” said the company.

The fourth-quarter loss drove the full-year bottom line into the red, as it registered a net loss of S$289.7 million, compared with a net profit of S$560.1 million a year earlier. Revenue for the year fell 14.8 per cent to S$5 billion. Although shares of Sembcorp Marine rose 2.8 per cent to close at S$1.46 before the earnings announcement, the stock has fallen 52 per cent in the past 12 months, the second-worst performer in Singapore’s Straits Times Index.

Sembcorp Marine’s bigger rival, Keppel Corp, was also hit as Sete Brasil, a major customer for the pair, is running out of funds and has not paid both rig builders since November 2014. Keppel said last month it took a charge of S$230 million because of Sete Brasil.

Sete Brasil has US$10.5 billion (S$14.7 billion) of orders placed with Keppel and Sembcorp Marine, accounting for about 40 per cent of the companies’ order books, according to Nomura Holdings and DBS Vickers Securities. The Brazilian company fell into financial distress after it was unable to secure long-term financing amid allegations of kickbacks to its only client, state-run oil producer Petrobras.

Worldwide, builders of floating facilities for drilling and production have reported losses in recent quarters as oil plunged more than 40 per cent in the past year, leading companies to cut spending and cancel orders. Keppel and Sembcorp Marine face the risk that clients will ask for further delivery delays or cancellations and that new orders will dry up, with crude oil trading at lows not seen in more than a decade. AGENCIES

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