Sembcorp Industries Limited’s Latest Earnings: A Review of Its Strategic Direction Is Coming

Yesterday, Sembcorp Industries Limited (SGX: U96) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, Sembcorp Industries’ revenue comes from its three business segments: Utilities; Marine; and Urban Development and Others. The company’s Marine segment comes from its 61% 60.9% 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 Sembcorp Industries’ latest financial figures:

1. Revenue rose 12.9% year-on-year to $2.14 billion.

2. Share of results from associates and joint ventures was $57.6 million for the quarter, up 61.5% 61.6% from a year ago.

3. Net profit attributable to shareholders was up 11.3% to $119.1 million for the first quarter.

4. Consequently, diluted earnings per share (EPS) was up 12.5% 12.4% to 6.09 cents, up from the EPS of 5.41 5.42 cents recorded in the first quarter last year.

5. Cash flow from operations for the reporting quarter was $118.3 million and capital expenditure was $351.9 million. Sembcorp Industries generated negative free cash flow of over $233.6 million for the reporting quarter, down from the negative free cash flow of $122.1 million seen a year ago ($67.9 million in cash flow from operations and $190.0 million in capex).

6. As of 31 March 2017, the company had $1.85 billion in cash and equivalents and borrowings of $9.58 billion. This results in a net debt position of $7.73 billion. This is a decline from a net debt position of $6.58 billion recorded a year ago.

Sembcorp Industries recorded higher revenue and profit for the first quarter of 2017. The revenue growth comes after a string of declines over the past two years. But there is still work to be done for the company. For the first quarter of 2017, the conglomerate generated negative free cash flow and increased its debt.

Operational highlights

The Utilities segment’s revenue rose 47% year-on-year, ending the quarter with $1.3 billion. But, net profit fell 27% to $55.3 million due to a weak showing from its India operations because of a lack of long-term power purchase agreements being available in the market.

Elsewhere, the Urban Development segment posted $37.2 million in profits, a huge increase from the $1.2 million profit recorded last year. This helped to lift Sembcorp Industries’ total net profit by 11%. For more insight on the Marine segment’s performance during the quarter, check out my article on Sembcorp Marine here.

Sembcorp Industries has a new chief executive officer, Neil McGregor, who was appointed on 1 April 2017. Tang Kin Fei, the previous CEO, stepped down at the end of March. McGregor summarized Sembcorp Industries’ performance in the first quarter with the following comments:

“Sembcorp delivered a reasonable set of first quarter results, underpinned by a good performance from our Urban Development business. This underscores how our diversified portfolio of businesses gives us some strength and resilience as a Group.”

He added that Sembcorp Industries will be undergoing a strategic review of its business in the next few months:

“As Sembcorp’s new Group President & CEO, I will be working closely with the board and management to stabilise and strengthen our position in our markets.

Over the next few months, we will be undertaking a complete review of our businesses and strategic direction. As we position Sembcorp for the future, our focus will be on performance, sustainability and value creation.

We face a challenging macro environment with rapidly changing market dynamics. This requires us to focus on cost discipline and strengthening operating performance. As we reshape Sembcorp, we will continue to build businesses that are durable and sustainable.

I am confident that Sembcorp has a distinctive portfolio that will in time deliver long-term value growth for our shareholders.”

Sembcorp Industries’ shares last traded at $3.00 each yesterday. It had a price-to-earnings ratio of 14.7 and a dividend yield of 2.7%.

Editor’s note: Corrections were made to four figures in the original article.  


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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.