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A Look at Sembcorp Industries’ 2012 Results

Sembcorp Industries (SGX: U96) reported its full year results on 26 Feb 2013. Revenue increased by 12.6% from S$9.05b to S$10.19b. Net profit declined by 6.9% from S$809.3m to S$753.3m. Diluted earnings per share saw a slightly larger decline of 7.0% from 44.98 cents to 41.84 cents.

It was a mixed year for Sembcorp Industries’ 2 main businesses, the Utilities and Marine segments. Together, these two businesses account for 90% of Sembcorp Industries’ full year profit.

The Utilities business saw yearly sales increase by 15% from S$4.89b to S$5.62b. Full year profit grew by 23% from S$304.4m in 2011 to S$374.6m in 2012. The Utility business has seen net profit increase by a compounded annual growth rate of 20% since 2002. 3 important events happened in 2012; the May completion of the Salalah Independent Water and Power Plant (IWPP) in Oman; the August completion of the Integrated Wastewater Treatment (IWWT) plant in Singapore in August; and the acquisition of power assets in China that was completed in September.

There are 3 more projects set to be completed by the Utilities business from June 2013 to December 2013 on Jurong Island. On top of an already-strong earnings base, the acquisitions, newly completed plants, and the new projects slated for completion later in the year would result in additional earnings stream for Sembcorp Industries in the future.

The Marine business’ sales grew by 12% from S$3.96b to S$4.43b. Lower margins from new design rigs and resumption of margin recognition on completion and delivery of the Songa Eclipse semi-submersible rig in FY2011 lead to a drop in full year profit of 28.4% from S$456.2m to S$326.7m. Sembcorp Industries’ marine business is represented by a 60% ownership of Sembcorp Marine (SGX: S51).

Prospects for the future of the Marine business looks better than last year with Sembcorp Marine’s current net order book of S$13.6b – the highest in 8 years. Demand for vessels in the marine industry looks strong as we head into 2013, judging from how order books have also increased major players in the industry such as Norwegian ship building company STX OSV (SGX: MS7) and the Offshore and Marine division of Keppel Corp (SGX: BN4). The former saw an increase of 20% in its order book to NOK 16.35b in its latest quarter, compared to NOK 13.6b a year ago. The latter’s order book jumped by 36.2% from S$9.4b in 2011 to S$12.8b in 2012. Finally, Sembcorp’s Urban Development business saw a 6% increase in profit from S$38.7m to S$41.1m. Sales for this business grew by 31% from S$88.6m to S$116.1m.

Sembcorp Industries has proposed a dividend of S$0.15 per share, subject to shareholders’ approval. If approved, the total dividend payout for 2012 will be S$0.02 less than 2011’s S$0.17 per share.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any companies mentioned.