Sembcorp Marine Ltd’s Latest Earnings: Still Hurting

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Sembcorp Marine Ltd  (SGX: S51) reported its 2017 first quarter earnings yesterday evening. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, Sembcorp Marine is a global leader in the offshore and marine industry. The firm builds offshore platforms, rigs, and floaters, and also repairs and upgrades various types of vessels.  Sembcorp Industries Limited (SGX: U96) is the majority owner of Sembcorp Marine.

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

Financial highlights

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

1. The reporting quarter’s revenue was down 17.2% year-on-year to $760 million.

2. Sembcorp Marine also saw its profit attributable to shareholders get sliced by 28.8% to $39.5 million.

3. Consequently, earnings per share (EPS) was $0.0189 for the reporting quarter, down by over 28% from the EPS of $0.0263 in the same quarter last year.

4. For 2017’s first quarter, Sembcorp Marine also generated a negative S$87.1 million in cash flow from operations. With capital expenditure of S$52.7 million, the oil rig builder logged negative free cash flow of almost $140 million for the reporting quarter. A year ago, there was negative free cash flow of $175.0 million ($72.9 million in negative cash flow from operations, and $102.1 million in capex).

5. Sembcorp Marine had $1.22 billion in cash and equivalents and $4.34 billion in borrowings, as of 31 March 2017. The balance sheet has weakened compared to a year ago when there was $957.1 million in cash and equivalents and $3.90 billion in borrowings.

6. The oil rig builder has a net orderbook of $4.02 billion, as of 31 March 2017. This is a decline from the $4.7 billion recorded at the end of 2016. (Note: both figures exclude Sete Brasil orders.)

Sembcorp Marine’s 2017 first quarter revenue declined at a slower rate compared to the first quarter of 2016, but there is really little to cheer about when it comes to a 17% decline. The company’s profit also fell by 28% while its free cash flow remained negative. The firm’s balance sheet added more debt as well.

Operational highlights and the outlook ahead

The Rigs & Floaters segment continues to be weak. For the first quarter of 2017, the segment’s revenue fell by 36% year-on-year to $347 million. Elsewhere, the Offshore Platforms segment helped partially offset the lower revenue from the Rigs & Floaters segment by posting a 16% year-on-year jump in revenue to $302 million.

Despite the lack of growth in the first quarter of 2017, Sembcorp Marine’s management is still upbeat about the company’s prospects. It said the following in the earnings release:

“Oil prices appear to have stabilised. Global exploration and production spending is expected to increase in 2017, compared to the last 2 years.

Enquiries for non-drilling solutions continue to be encouraging. We are cautiously optimistic of new orders for production facilities in the next few years.

Sembcorp Marine’s strategy and focus remain anchored on strengthening and optimising our talent pool; pursuing operational excellence in executing our projects; investing in new capabilities, products and technological innovation to help grow our order book; and prudently managing our financial resources to preserve financial flexibility and ensure overall sustainability of our business.”

At its closing share price of $1.73 yesterday, Sembcorp Marine has a price to earnings ratio of 57 and a trailing dividend yield of 1.4%.

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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.