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3 Things Investors Should Know About Sembcorp Marine Ltd’s Latest 2016 Results

Sembcorp Marine Ltd (SGX: S51) is one of the largest oil rig builders in the world. The company is also a 61%-owned subsidiary of the conglomerate Sembcorp Industries Limited (SGX: U96).

Two weeks ago, Sembcorp Marine reported its 2016 full year results. Let’s look at three useful pieces of information from the results announcement:

1. The overall numbers

Here’s a table showing some important revenue, profit, and cash flow numbers for Sembcorp Marine for 2016 and 2015:

Sembcorp Marine revenue and profit and cash generated
Source: Sembcorp Marine 2016 full year results announcement

Although the company saw its revenue fall steeply by 29%, the other numbers all improved.

Not only did Sembcorp Marine turnaround its loss-making position into a profit position, it also saw big improvement in its cash generated from operations (an increase from a negative S$867 million to a positive S$$669 million). The improvement in the company’s operating cash flow is mainly due to a better working capital position.

2. An overview of the order book

The following chart shows the changes to Sembcorp Marine’s order book from 2015 to 2016:

Sembcorp Marine order book
Source: Sembcorp Marine 2016 full year results announcement

We can see that the company’s order book in 2016 is down by almost 25% as compared to 2015. Moreover, the S$320 million in new orders secured in 2016 is just 10% of the S$3.17 billion in new orders secured in 2015.

All told, 2016 was a challenging year for Sembcorp Marine when it came to securing new orders.

3. Growth in the Offshore Platforms business

The table below shows the year-on-year revenue changes for Sembcorp Marine’s various business segments for the quarter and year ended 31 December 2016:

Sembcorp Marine segment revenue table
Source: Sembcorp Marine 2016 full year results announcement

Although most of Sembcorp Marine’s business segments had a weak 2016, the Offshore Platforms segment had a decent year with a 10% increase in revenue.

In all, 2016 was a challenging year for Sembcorp Marine, driven mainly by weak oil prices throughout most of the year.

Although the company managed to achieve overall profitability and positive operating cash flow, unless there is a meaningful recovery in its order book, Sembcorp Marine may find it difficult to regain the much higher level of profits it was previously posting over the past few years.

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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.