9 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).

There may be new information investors can pick out from these webcasts.

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 fellow blue chip SembCorp Marine Ltd  (SGX: S51).

You can read more about SembCorp Industries in here.

Powering down?

Below are nine useful things I learned from listening to SembCorp Industries’ recent fiscal third-quarter earnings webcast:

  1. The Utilities segment contributed 60% of SembCorp Industries’ net profit for the first nine months of 2015. Marine, on the other hand, contributed 30%.
  2. Net profit for the Utilities segment rose 3% year-on-year for the first nine months of 2015. This was supported, though, by divestments worth $72.4 million. Without the divestments, the segment’s net profit would have fallen by 22% when compared to the first nine months of 2014. SembCorp Industries also recently completed a sale of its 40% stake in an Australian waste management joint venture. A net gain of $350 million is expected to be recognised in the fourth quarter this year.
  3. Koh Chiap Khiong, Chief Financial Officer, also said that one of its Jurong Island customers is in receivership. Koh added that the receiver has requested SembCorp Industries to continue supply, which the company sees as an encouraging sign given the circumstances. Koh said that the customer has been struggling to get its operations going due to shareholder conflict. The customer in question could be Jurong Aromatics Corporation, which is said to have a 20 year utilities and waste management contract with SembCorp Industries. Koh added that an allowance of doubtful debt has been recorded to be conservative, but SembCorp Industries is optimistic that this issue can be recovered.
  4. SembCorp Marine took a battering as well. Net profit was down 36% year-on-year for the first nine months of the year. Its dispute with Marco Polo Marine Ltd  (SGX: 5LY), which surfaced last week, might be a sign that SembCorp Marine’s troubles are not over, yet.
  5. There were some brighter spots amidst the tough results. The Utilities segment’s overseas contribution increased to 63% of the first nine months of the year. Results from China, Middle East & Africa, United Kingdom, and the Americas saw net profit growth of more than 20% year-on-year.
  6. Operating cash flow before changes in working capital was $1.03 billion for the first nine months of 2015. But, after working capital changes and taxes paid, operating cash flow was a negative $162 million. Koh said that the changes in working capital was mainly due to SembCorp Marine’s ongoing rig building projects.
  7. As mentioned in my earnings summary, SembCorp Industries reported a net debt position of $4.6 billion as of 30 September 2015, an increase from the $2.3 billion recorded on the same date last year. Interest coverage fell partly as a result, from 21.9 times in the first nine months of 2014, to just 6.6 times in the same period this year.
  8. The 1320 megawatt (MW) Thermal Powertech Corporation India (TPCIL) plant is in full commercial operation. TPCIL, though, recorded a $12.3 million loss for the third-quarter of 2015. Management is guiding for TPCIL break-even for this year.
  9. Management was also questioned about the sustainability of the current dividend for its subsidiary, SembCorp Marine. Tang Kin Fei, Group President and Chief Executive Officer, said that SembCorp Industries is not able to give guidance for SembCorp Marine. However, Tang pointed out that SembCorp Industries has guided for the Utilities segment to do better in 2015 compared to the previous year (note however, that the segment is supported  by the aforementioned $350 million divestment of the Australian waste management joint venture). Tan felt that the dividend assessment should be done as a whole.

Foolish takeaway

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

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.