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Sembcorp Marine Ltd’s Year in Review: 3 Slides that Highlight A Tough Year

Oil rig builder Sembcorp Marine Ltd (SGX: S51) reported its full year earnings for 2016 in late February.

In 2016, Sembcorp Marine earned $3.55 billion in revenue, a figure that was more than 28% lower than in 2015. Difficult market conditions continued to persist as orders dried up for the company while competition intensified.

To get a view of how tough it had been, here’re three slides from Sembcorp Marine’s 2016 full year earnings that sum up the year.

Revenue woes

2017-03-09 SembCorp Marine Revenue
Source: Sembcorp Marine’s earnings presentation

Sembcorp Marine’s revenue started to come under pressure in the fourth quarter of 2014. In 2015, revenue for the oil rig builder fell almost 15% to end at nearly $5 billion. If that wasn’t enough, Sembcorp Marine felt the squeeze again in 2016, recording $3.55 billion in revenue. This is down more than 28% from 2015. The company’s chief executive Wong Weng Sun summed up the year:

“The fall in oil prices had resulted in upstream oil & gas capex reducing for a second consecutive year in 2016. Day rates and utilisation levels for existing rigs remained at cycle-low levels.

Competition intensified as players competed in a shrinking market for orders. With financial players holding or withdrawing their exposure to the sector, the resulting lack of financing posed further challenges for all players across the value chain.”

As revenue goes, so does profits

2017-03-09 SembCorp Marine Net Income
Source: Sembcorp Marine’s earnings presentation

Sembcorp Marine fell into a $290 million loss for 2015. In 2016, the oil rig builder was able to turn it around to post a profit of $79 million. While the turnaround is a welcome sight, the profit level in 2016 is a far cry from the $560 million Sembcorp Marine recorded in 2014.

Wong said:

“Despite the increasingly challenging business conditions, the Group returned to profitability in FY2016, and generated significant operating cash flows to support its operational and investment activities.”

Contracts have dried up

2017-03-08 SembCorp Marine New Contracts
Source: Sembcorp Marine’s earnings presentation

The company ended 2016 with a net orderbook of $4.7 billion. While the outstanding order book looks healthy, the number of new contracts have dried up. For 2016, Sembcorp Marine was able to secure $320 million in new contracts. This is a huge decline from the $3.2 billion in orders it was able to secure in 2015.

We will have to watch for improvements in the year 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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.