Key Takeaways From SembCorp Industries Limited’s Latest Quarterly Earnings


SembCorp Industries Limited (SGX: U96), a conglomerate with businesses in Utilities, Marine, and Urban Development, released its second quarter results yesterday. Its marine business is housed under its listed subsidiary Sembcorp Marine Ltd (SGX: S51), which reported its own set of results on Monday.

For the quarter ended 30 June 2014, SembCorp Industries’ total revenue increased 1.4% year-on-year to S$2.53 billion mainly due to a good showing from its Marine business (thank you, Sembcorp Marine!). Quarterly revenue for the Marine arm rose 19% year-on-year to S$1.34 billion on the back of higher revenue recognition for rig building projects. Revenue from this segment contributed to 52.8% of SembCorp Industries’ total revenue for the quarter.

SembCorp Industries’ Utilities business is the next big contributor to its overall top-line at 45.7%. It had a relatively poor quarter though, as revenue fell 13% to S$1.16 billion. Big reasons for the slowdown in Utilities’ top-line had been due to the “de-consolidation of Salalah and Singapore operations’ lower electricity sales, lower gas offtake and lower High Sulphur Fuel Oil (“HSFO”) prices recorded during the period.”

The above dynamics, along with a decrease in finance costs and an increase in share of results of associates and joint ventures, had consequently led net profit to grow by 8.3% to S$179 million. In particular, SembCorp Industries’ share of results from associates and JVs had went up 73.9% year-on-year due to higher contributions from associates of its Marine and Urban Development businesses.

For the first half of 2014, SembCorp Industries’ total revenue and net profit both went up 6% year-on-year to S$5.2 billion and S$363.9 million respectively.

Tang Kin Fei, Group President and Chief Executive Officer of SembCorp Industries, gave some context to SembCorp Industries’ progress:

“In the first half of 2014, we continued to make good progress in the execution of our pipeline of projects which will underpin the future growth of the Group. We have completed the construction of our 400-megawatt cogeneration plant in Singapore, while the first unit of our 1,320-megawatt power plant in India is currently undergoing pre-commissioning. Meanwhile, our Marine business’ shipyard in Brazil remains on track to commence initial operations later this year.”

For the Utilities business, SembCorp mentioned that competition in Singapore’s power market has turned keen and thus, the performance of local operations may be impacted. However, overseas operations are expected to deliver continued growth. The Marine business has a net order book of S$12.7 billion, which includes S$2.5 billion in new contracts secured since the start of the year. Completion and deliveries stretch well into 2019.

With a steady 6% increase in profit for the first half of 2014, SembCorp Industries has elected to share the spoils with its shareholders by declaring an interim dividend of S$0.05 per share. There was no such dividend declared in the previous year.

SembCorp Industries’ shares closed at S$5.41 on Wednesday. This translates to a historical PE ratio of 12 and a dividend yield of 3.7%.

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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 Sudhan P doesn’t own shares in any companies mentioned.