Here’re What SembCorp Marine Ltd Shareholders Need to Know About Sete Brasil and the Marco Polo Marine Debacle  

SembCorp Marine Ltd (SGX: S51) has had its share of troubles lately.

The saga with its major customer, Sete Brasil , looks set to drag on. SembCorp Marine is also involved in a legal battle with Marco Polo Marine Ltd (SGX: 5LY) Elsewhere, the beleaguered rig builder also halved its dividend last year, casting doubt on the sustainability of its dividend in the future.

A recent earnings announcement shed some light on these topics. Here’re a couple of snippets which may interest investors:  

On Sete Brasil

In the previous quarter, SembCorp Marine said that it had significantly slowed down construction for Sete Brasil projects. SembCorp Marine also said that a S$329 million provision has been taken in last year’s fourth quarter.

Wong Weng Sun, Chief Executive Officer for SembCorp Marine, provided an update around the issue in his opening address:

“Sembcorp Marine has announced on 22 April, 2016 that the Group has been informed by Sete Brasil that its shareholders had approved a resolution to file for judicial recovery. As such, we have commenced arbitration proceedings against various subsidiaries of Sete Brasil to preserve our interests under the Sete Brasil contracts. We have also had preliminary conversations with Sete Brasil.”

Wong also said that the original provision of S$329 million is sufficient at the present moment. Unfortunately, the situation could get more complex, Wong notes:

“In Brazil, the political upheavals remain unabated, with the ongoing process to impeach the Brazilian President. Such development and the deteriorating economy have contributed to the ongoing volatility and uncertainty of the situation in Brazil.”

In all, the Sete Brasil situation could drag on for a while.

On Marco Polo Marine

SembCorp Marine, through its subsidiary PPL Shipyard (PPLS), commenced legal action against Marco Polo Marine (MPM) on 1 December 2015.

“PPLS also started arbitration proceedings on 7 April 2016 against MPD [Marco Polo Drilling].”

“On 22 April 2016, MPM obtained a stay of proceedings in the High Court action. This decision did not mean that the action was dismissed, but that the Court ruled that we needed to refer the claim to arbitration. This is a procedural ruling and does not decide on the merits of our claim against MPM. PPLS will pursue the claim either by way of an appeal against the stay to continue the action in the High Court or pursue the claim at the arbitration proceedings.”

At the moment, there is no conclusion in sight for the legal wrangle with Marco Polo Marine. We will have to keep watching for future development.

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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.