SembCorp Industries Limited’s Latest Earnings: Utilities’ Profits Up 21%, But Marine Remains Troubled

Sembcorp Industries Limited (SGX: U96) reported its third-quarter earnings results yesterday evening. The reporting period was for 1 July 2016 to 30 September 2016.

As 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 from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).

You can catch up with the results from Sembcorp Industries’ previous quarter here.

Financial highlights

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

  1. Revenue fell 10.8% year-on-year. The utilities and marine engineering giant recorded $2.1 billion in sales for the reporting quarter.
  2. Net profit for the period was also down, plunging over 58% year-on-year to around $58.4 million. A sharp 83% decline in share of results from associates and joint ventures to just $3.5 million had contributed to the lower bottom-line.
  3. Consequently, earnings per share (EPS) was down nearly 61% to 2.44 cents in the reporting quarter. In the third-quarter last year, Sembcorp Industries recorded EPS of 6.24 cents.
  4. Cash flow from operations was around $838.7 million for 2016’s third-quarter. Capital expenditure was $206 million. This gives Sembcorp Industries free cash flow of around $633 million for the reporting quarter, up significantly from the negative $337.6 million seen a year ago ($106.2 million in cash flow from operations and $443.8 million in capex).
  5. As of 30 September 2016, the company has $2.09 billion in cash and equivalents and borrowings of $8.73 billion. This gives a net debt position of around $6.6 billion. This is down from a net debt position of $5.2 billion at the end of the last year and a net debt position of $4.6 billion as of 30 September 2015.

It was another tough quarter for Sembcorp Industries with both revenue and profit falling compared to a year ago. Net debt also increased compared to the previous year, but was unchanged from the previous sequential quarter. On a brighter note, the conglomerate managed to generate positive free cash flow.

It is worth noting that Sembcorp Industries recorded $612.7 million in trade receivables for 2016’s third-quarter. This compares with the $461.9 million in trade receivables recorded a year ago. Given that revenue has declined by 10.8% year-on-year, this suggests that the conglomerate has some work to do in collecting customer payments on time.

Operational highlights

The Utilities segment is a bright spot for Sembcorp Industries. Revenue was up by 3% year-on-year, ending the quarter at $1.2 billion, while net profit for the segment managed to grow by 21% to $108.9 million. The higher profit from the Utilities segment is a welcome change from the previous few quarters.

For more on the marine segment, check out my earlier article on Sembcorp Marine’s third-quarter results here.

Sembcorp Industries’ president and chief executive, Tang Kin Fei, had summarized the conglomerate’s third-quarter results with the following statement:

“Sembcorp’s diversified portfolio gives us strength and resilience as a Group. Our Utilities business delivered a healthy performance in 9M2016. The business’ net profit was up 11% excluding divestment gains recorded the previous year. Overseas Utilities operations delivered a 20% net profit growth.”

Looking ahead, Sembcorp Industries expects to complete its SGPL (Sembcorp Gayatri Power) power plant by the end of this year. Meanwhile, the TPCIL India power plant will see a full year’s contribution to the Utilities segment. But, Sembcorp Industries also warned that its Singapore utilities’ business 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 $2.48, Sembcorp Industries traded at 16.3 times trailing earnings and has 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.