3 Must-Read Quotes from Sembcorp Industries Limited’s Management on Its Strategic Business Review

Sembcorp Industries Limited  (SGX: U96) has a new chief executive officer. His name is Neil McGregor and he took over the reins on 1 April 2017.

One of McGregor’s first moves as CEO was to review Sembcorp Industries’ businesses and strategic direction. The review is expected to take six months. During Sembcorp Industries’ 2017 first quarter earnings briefing, important thoughts on the review process were shared by management. Here’re three quotes investors may not want to miss.

Why now?

In his opening speech, McGregor said:

“As we embark on this review, three words come to mind, in terms of my focus, as we position Sembcorp for the future. They are performance, sustainability, and value creation. As I said earlier, we face a challenging macro environment, with rapidly changing market dynamics.”

In the statement above, McGregor outlined the reasons for pursuing a strategic review. Later on, he delved deeper into the challenges that Sembcorp Industries is facing:

“This is a very difficult environment that we’re in.

The oil sector is down and the electricity sector in Singapore, in India, and also in our other markets, is quite challenging, mainly because there’s no — well, very little growth coming through because economies — well, the world economy is not in great shape, and the power, gas and water sectors, to some degree, which we serve all, are really a function of those.”

McGregor believes that there are both short-term and long-term challenges. In the short-term, he highlighted India, and also the firm’s cost structure. For instance, Sembcorp Industries’ SGPL (SembCorp Gayatri Power) power plant in India has yet to secure a long-term power purchase agreement. In the first quarter of 2017, the Utilities segment of Sembcorp Industries suffered a 27% decline in net profit largely due to the situation at SGPL.

Over the long-term, McGregor said that the strategic review will reveal what the company needs to do. He provided some insights on the long-term questions that Sembcorp Industries is attempting to answer:

“So we have to leave that to a strategic review and that’s something that we will have all options on the table in terms of looking at the kinds of businesses that we’re in, what our business model is for the future, and exactly what sort of trends are coming through and how do we best position the company given that we have the position now, and where do we move to in the future?”

Investors will have to wait for the review to be concluded before any conclusions can be drawn.

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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.