The 4 Ways That Sembcorp Industries Makes Money

Over the past 12 months, the oil and gas industry has been under pressure. Due to the downturn in oil prices, many of the players face challenges to maintain profitability.

In Singapore, one of the main casualties of the oil downturn has been SembCorp Industries Limited (SGX: U96), a conglomerate with an exposure to the rig and marine business through its subsidiary Sembcorp Marine Ltd (SGX: S51).

The stock price is fallen significantly.

The fall is justifiable, since the marine segment has underperformed by posting a loss in year 2015 after a profitable 2014.

Yet, investors might have overlooked the fact that Sembcorp Industries is a “diversified conglomerate”. In other words, the company makes money through exposure to more than just one business.

Here, we will look at the different ways Sembcorp Industries makes its money.


Screenshot from annual report 2015

The company has 4 main segments.

Utilities: This is by far the biggest segment in the business, accounting for more than half annual profit of the group. In this segment, the company develops, owns and operates energy and water assets.

With facilities of over 10,600 megawatts of gross power capacity and over nine million cubic metres of water per day in operation and under development, the company owns assets in 15 different countries around the world.

Marine: An integrated provider of marine and offshore engineering solutions with a track record of more than 50 years.

The company focuses on four key capabilities: rigs & floaters; repairs & upgrades; offshore platforms and specialised shipbuilding. This segment was the biggest profit contributor in 2014 but is facing headwind in 2015 due to low oil prices.

Urban development: This business owns, develops, markets and manages integrated urban developments, comprising industrial parks as well as business, commercial and residential space in Asia.

The saleable land bank held is about 5,444 hectares of which 3,036 hectares are industrial land, and 2,408 hectares are commercial and residential land, mainly in in Vietnam, China and Indonesia.

Though the marine business has been significantly affect by the industry downturn, investors should look at other parts of the conglomerate too.

By understanding the nature of different business segments and their financial contributions towards the group, investors can form a more balanced opinion of the attractiveness of Sembcorp Industries as a long term investment.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.