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Sembcorp Industries Limited’s Latest Earnings: Another Quarter of Declines

Sembcorp Industries Limited (SGX: U96) reported its second-quarter earnings yesterday evening. The reporting period was for 1 April 2016 to 30 June 2016.

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

You can read more about Sembcorp Industries in here or catch up with the results from its previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures for Sembcorp Industries:

  1. Revenue for Sembcorp Industries fell by 22.7% year-on-year to $1.85 billion.
  2. Net profit attributable to shareholders for the period did worse, plunging 61% year-on-year to $86.5 million. A 35% decline in share of results from associates and joint ventures to $38 million had played a role in the lower bottom-line.
  3. Consequently, diluted earnings per share (EPS) was down nearly 65% to 4.25 cents in the reporting quarter. In the second-quarter of 2015, Sembcorp Industries had recorded EPS of 12.09 cents.
  4. Cash flow from operations was around $178.6 million for 2016’s second-quarter. Capital expenditure was $259.7 million. This gives Sembcorp Industries negative free cash flow of over $81 million for the reporting quarter, which is a huge improvement from the negative $700 million seen a year ago (a negative $399.4 million in cash flow from operations and $300.5 million in capital expenditure).
  5. As of 31 June 2016, the company had $1.68 billion in cash and equivalents and total borrowings of $8.5 billion. This gives a net debt position of around $6.8 billion. This represent declines from its net debt position of $6.6 billion and $4.12 billion it had a quarter and year ago, respectively.

In sum, it has been another tough quarter for Sembcorp Industries with both revenue and profit falling hard compared to a year ago. Debt had continued to increase and while the conglomerate’s free cash flow had improved, it was still negative.

Sembcorp Industries had proposed an interim dividend of S$0.04 per share for the reporting quarter, down from the dividend of S$0.05 per share paid out last year.

Operational highlights and the road ahead

The Utilities segment’s revenue fell by 20% year-on-year, ending the quarter at $895 million. Net profit for the segment also fell 47% year-on-year. For more on the marine segment, check out my article on Sembcorp Marine here.

Sembcorp Industries’ Group President and Chief Executive Officer Tang Kin Fei had summarised the second-quarter in the earnings release:

“The current market environment remains difficult. Sembcorp has over the years built a strong foundation with our strategic presence in key emerging markets and solid capabilities in the energy, water and marine and offshore sectors. Today, we are well-placed to navigate through the challenges ahead so as to create and deliver long-term value and growth.”

Looking forward, Sembcorp Industries is expecting to complete the SGPL (Sembcorp Gayatri Power) plant in India by the end of the year. The TPCIL India power plant will see a full year’s contribution for the Utilities segment. But, the segment’s Singapore operation continues to face intense competition.

Elsewhere, the oil and gas industry remains subdued and uncertain. Sembcorp Marine will be focusing on costs, liquidity, and the management of its balance sheet.

At its closing share price yesterday of $2.78, Sembcorp Industries traded at around 15 times trailing earnings and has a trailing dividend yield of 3.6%.

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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.