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6 Quick Things Investors Should Learn About SembCorp Industries Ltd

SembCorp Industries Ltd (SGX: U96) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for SembCorp Industries is here).

SembCorp Industries has three business segments, namely Utilities, Marine, and Urban Development & Others. The former two are by far the most important for SembCorp Industries and it’s worth noting that the conglomerate’s Marine business stems from its majority ownership of SembCorp Marine Ltd  (SGX: S51).

You can read more about SembCorp Industries in here.

Powering down?

Below are six useful things I learned from listening to SembCorp Industries’ recent second-quarter earnings webcast:

  1. Like in the previous quarter, SembCorp Industries’ overseas utilities business did better than in Singapore. The company’s China wind energy operations expanded by 150 mega-watt (MW) to 296 MW during the quarter. This led to SembCorp Industries’ China operations recording a 33% year-on-year growth in net profit for the first-half of 2015. Meanwhile, the firm also divested its UK water operations for S$54.7 million during the same period. The divestment and profit growth in China helped push net profit for the utilities segment up by 17% year-on-year in the first-half of 2015.
  2. Group Chief Financial Officer Koh Chiap Khiong also took time to highlight SembCorp Industries’ position in India and China’s energy market. In India, SembCorp Industries is a leading foreign energy player with a power generation capability of more than 3,300 MW spread out across the country. The first Thermal Powertech Corporation India (TPCIL) 660 MW unit in India is in operation and the second one is expected to come online in the third-quarter of 2015. In China, SembCorp Industries has 23 power and water operations in 11 provincial regions.
  3. Moving on to the Urban Development business segment, Koh said that the 750 hectare Vietnam Singapore Industrial Park (VSIP) Nghe An land is earmarked for pre-positioning for the Trans-Pacific Partnership trade agreement.
  4. SembCorp Industries also provided a breakdown of its total group borrowings of $5.8 billion. That chunk of debt can be organized into $1.3 billion of corporate debt, $2 billion in project debt, and $2.5 billion for SembCorp Marine debt.
  5. The conglomerate’s total debt of $5.8 billion is a significant increase from the figure of $4.7 billion seen at the end of 2014. Majority of the increase came from SembCorp Marine’s spending for its new yard in Brazil and working capital needs. The consolidation of Green Infra’s debt into SembCorp Industries’ balance sheet also pushed up the conglomerate’s borrowing levels. SembCorp Industries had an interest coverage ratio of 8.1 times for the first-half of 2015; this is less than half the selfsame figure of 20.8 recorded in 2014. Part of the reason for the decrease in the interest coverage ratio was that the expense for TPCIL was now recorded in the income statement and not capitalized.
  6. According to Koh, TPCIL is still operating at a loss due to start-up costs. As such, investors may want to evaluate the profitability of the venture over a longer period of time.

Foolish takeaway

To buy and hold a company’s shares for the long-term also means the need to keep up with developments in the firm.

The access to management teams via webcasts and transcripts gives the Foolish investor a fair chance to judge for themselves whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.