SembCorp Industries Limited’s Latest Earnings: Another Tough Quarter

SembCorp Industries Limited (SGX: U96) reported in its first quarter earnings report yesterday evening. The reporting period was for 1 January 2016 to 31 March 2016. 

SembCorp Industries’ revenue comes from its three different business segments: Utilities; Marine; and Urban Development & Others. The Marine segment’s contribution mainly comes from SembCorp Industries’ 61% ownership stake in SembCorp Marine Ltd (SGX: S51).

You can read more about the company here or catch up with the previous earnings here .

Financial highlights

Here’s a rundown on the latest financial figures for SembCorp Industries:

  1. Revenue for SembCorp Industries plunged 18.9% year on year. The utility and marine giant recorded $1.9 billion in sales for the reporting quarter.  
  2. Net profit for the period was also down, falling 24.7% year on year to $107 million. Share of results from associates and joint ventures also fell by 11%.   
  3. Earnings per share (EPS) was down 30.4% to 5.42 cents in the reporting quarter, down from 7.79 cents per share in the first quarter last year.
  4. Cashflow from operations was around $68 million for 2016’s first quarter. Capital expenditure was $190 million. This gives SembCorp Industries negative free cash flow of $258 million for the reporting quarter.
  5. As of 31 March 2016, the company had $1.9 billion in cash and equivalents and borrowings of $8.5 billion in debt. This gives a net debt position of around $6.6 billion. This is a deterioration from its net debt position of $3.9 billion on 30 September 2014.

It’s another tough quarter for SembCorp Industries with both revenue and profit falling compared to a year ago . The conglomerate generated negative free cash flow while debt increased on its balance sheet.

It is worth noting that SembCorp Industries recorded $1.3 billion in trade receivables for the first quarter of 2016. This compares with the $1.2 billion in trade receivables recorded in the same quarter last year. Given that revenue has declined by 18.9% year on year, this suggests that the conglomerate has some work to do in collecting customer payments on time.

Operational Highlights

The Utilities segment’s revenue fell by 7% year on year, ending the quarter with $895 million in sales. Net profit for the utilities segment inched up 1% year on year. For more on the marine segment, check out my article on SembCorp Marine here .

Group President and Chief Executive Officer of SembCorp Industries , Tang Kin Fei summarized the first quarter in his own words :

“Sembcorp’s diversified portfolio in different businesses and geographies gives us strength and resilience as a Group. With a strong pipeline of facilities focused on growing markets such as China and India coming onstream between now and 2018, we are confident that Sembcorp’s overseas businesses will continue to grow.”

Looking forward, SembCorp Industries is expecting to have the full year’s contribution of the TPCIL power plant in India for the Utilities segment. However, its Singapore utilities operations continues to face intense competition. Elsewhere, SembCorp Marine expects a protracted down cycle which is more severe than previous cycles. The Marine segment maintains a cautious outlook.   

Foolish summary

At its closing price yesterday of $2.75, SembCorp Industries traded at around ten times trailing earnings and a trailing dividend yield of 4%.

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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.