SembCorp Marine Ltd’s Latest Earnings: Profits Cut in Half, Interim Dividend Cut by a Third

Yesterday, SembCorp Marine Ltd (SGX: S51) reported its second-quarter earnings. The reporting period was from 1 April 2017 to 30 June 2017.

SembCorp Marine is a global leader in the offshore and marine industry. Its business is made out of three major sectors: rig building, offshore and conversion and repair. SembCorp Industries Limited (SGX: U96) is its majority owner.

You can learn more about the company here, and catch up with the previous quarter’s report here.

Financial highlights

Here’s a rundown on the latest financial figures for the second-quarter:

1. Revenue was down 27.8% year on year, coming in at S$655.5 million.

2. Profits plunged by 65.5% year on year. The rig builder recorded $3.7 million in profit, a massive decline from 2016’s second-quarter profit of $10.7 million.

3. Earnings per share (EPS) was S$0.0027, down almost 51% from the $0.0055 in recorded last year.  

4. SembCorp Marine’s cash flow from operations was negative $247.1 million and capital expenditure was $45.8 million. With that, SembCorp Marine had negative free cash flow of $292.9 million for the quarter.

5. SembCorp Marine had $1.01 billion in cash and equivalents and $4.39 billion in borrowings, as of 30 June 2017. This is a deterioration from the $966.3 million in cash and equivalents and $3.98 billion in borrowings that it had on 30 June 2016.

6. The oil rig builder has a net orderbook of $3.60 billion, as of 30 June 2017. That is a decline from the $4.02 billion recorded at the end of the first-quarter of 2017. (Note: both figures exclude Sete Brasil orders.)

SembCorp Marine has reported another tough quarter. Revenue and profits are down by a huge amount, while the company recorded negative free cash flow. The rig builder’s balance sheet also added debt, compared to a year ago.  The board of directors proposed an interim dividend of one cent per share, a 33% decline from the 1.5 cents per share paid out a year ago.

Operational Highlights

All segments posted lower sales. The rigs & floaters segment continues to be weak. For the second-quarter, segment sales fell 23% year on year to $322 million. Repairs & upgrades had a 6% decline in sales to end at $138 million. Elsewhere, offshore platforms suffered a 48% decline to $172 million. 

The management at SembCorp Marine added commentary on the outlook:

“Global exploration and production spending is expected to increase. Offshore day rates appear to have stabilized and utilization levels have begun to improve. However, a more robust recovery will take longer.”

“Enquiries for non-drilling solutions continue to be encouraging. We have been actively involved with our potential customers in developing engineering solutions for the production segment. We remain cautiously optimistic of new orders for production facilities in the next few years.”

Foolish summary

SembCorp Marine shares closed $1.74 on Thursday. The stock traded at 63 times earnings and had a trailing dividend yield of 1.1%.

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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.