10 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 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 SembCorp Marine Ltd (SGX: S51).

You can read more about SembCorp Industries in here.

Powering down?

Below are 10 useful things I learned from listening to SembCorp Industries’ recent second-quarter webcast:

  1. Tang Kin Fei, SembCorp Industries’ chief executive, kicked off the meeting with an overview of the company’s results. For 2016’s first half, net profit for the utility segment declined 31% year on year. Tang noted that net profit was down by a lesser degree (S$12 million or 7% year on year), if the exceptional gains made last year for SembCorp SembCorp Water and SembSITA were excluded. Furthermore, he said that the divestments was partly behind the fall in profit for the first half of 2015. In short, Tang felt that the results were “similar to last year” if we exclude the one-off events.
  2. Tang also said that all the utility segment projects were on track. He added that there was an additional 104 mega-watts (MW) in operation for its wind and solar operations in India. SembCorp Industries has also signed a 22-year power purchase agreement (PPA) in Myanmar.
  3. Tang also spent some time talking about SembCorp Industries’ Thermal Powertech Corporation India Ltd (TPCIL) plants. TPCIL’s unit 1 has been in operations since march 2015, while unit 2 has been in operations since September 2015.  There were technical issues in the second quarter that has lead to Unit 2’s shutdown. The issues have been solved, and Tang is hopeful for a better second half of the year. The other Indian Thermal facility, SembCorp Gayatri Power Ltd (SGPL), has not secured a long term PPA yet.       
  4. Tang was candid on the Marine segment’s performance. He said that the results for the first half were disappointing. Orderbook was S$9.2 billion. Excluding Sete Brasil orders, SembCorp Marine’s orderbook was S$6 billion. Tang reiterated the comments made by SembCorp Marine, saying that it is focused on acquiring new technologies.
  5. Koh Chiap Khiong, SembCorp Industries’ chief financial officer, was on hand to give a rundown of the financial figures. Speaking on the group’s profit from operations, he said that India has become a significant contributor for the utilities segment in first half of the year. On the flipside, the Marine segment’s group profit from operations was down big due to project deferments and restructuring.
  6. Koh noted the shift in contribution between marine and non-marine businesses. For 2016’s first half, the non-marine segment made up 79% of net profits. This figure reduced from the 36% figure record in the first half this year, reflecting the tough conditions in the marine sector.  
  7. On the utilities segment, Koh said the Singapore operations remained weak, contributing lower sales and net profits. He added that operations in India, China and Middle East are in good shape.
  8. Koh provided an update on the product sub-segments of the Utilities segment as well. He said that the energy sub-segment contributed 57% of the utilities net profits. Water and on-site logistics & solid waste management accounted for 25% and 18% respectively.   
  9. SembCorp Industries ended the year with a net debt position of S$6.8 billion, an increase from S$5.2 billion recorded on the same date a year ago. Interest coverage fell to 3.4 times, down significantly from 7.2 times in 2015. Koh said that India’s projects will be highly geared in the first few years of operations, but the ratio will improve when the debts are paid down progressively.
  10. On the outlook, Koh said that the Singapore utilities operations will continue to face intense competition in the power market. He added the TPCIL operations will see a full year contribution in 2016. Elsewhere, the oil and gas industry remains subdued and uncertain.   

Foolish takeaway

To buy and hold for a company for the long term also means keeping up with developments in the company.

The access to management teams via webcast gives the Foolish investor a fair chance to judge for themselves as to whether they would like to be invested alongside the management teams that they have chosen. It also helps us put together a more complete thesis around the 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.