The offshore and marine sector in Singapore is struggling. This is not a secret. Companies in the sector know it, investors know it, and the government is aware too.
Because of the sharp decline in oil prices seen over the past three years (oil prices are currently around half of where they were in the middle of 2014), many companies in the offshore and marine sector, such as Ezra Holdings Limited (SGX: 5DN) and Ezion (SGX: 5ME), are struggling to stay afloat.
Back in November 2016, the Ministry of Trade and Industry had decided that the sector needed some help and set up some financing support schemes for oil & gas companies.
Then, in January 2017, Singapore’s national developer of industrial infrastructure, JTC, stepped in to help by giving rental rebates of between 3% and 10% to all its offshore and marine tenants and lessees for 2017.
With the latest Budget 2017 from Singapore’s government delivered earlier this week, there are now even more goodies to help the offshore and marine sector.
The government has decided to defer foreign worker levy hikes for both the marine and process sectors for another year from 1 July 2017 to 30 June 2018. This means that the levy rates for the marine sector basic tier R1 and R2 workers will be kept at S$300 and S$400, respectively.
But, it remains to be seen if the overall results of companies in the offshore and marine sector will improve in 2017 and beyond – there are a lot of other important factors involved besides the support provided by the Singapore government.
2016 was not a good year for many companies in the offshore and marine sector. In the case of Keppel Corp, its Offshore & Marine business segment saw its profit fall by over 90%, leading to a 49% decline in total profit for the company. Meanwhile, Sembcorp Marine has seen its revenue and profit fall by 25% and 82%, respectively, in the first nine months of 2016.
It will be interesting to see how the offshore and marine sector performs in the years ahead.
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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 writer Stanley Lim owns shares in Keppel Corporation.