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Sembcorp Industries Limited’s Latest Earnings: 3 Key Things to Know About its Dividend

Sembcorp Industries Limited (SGX: U96) is a regular dividend payer.  But its interim dividend was cut 25% in the latest quarter.

The conglomerate’s revenue comes from its three different business segments: utilities, marine, and urban development & others. The marine segment’s contribution mainly comes from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).

In its second-quarter earnings briefing, the conglomerate had three things to say about its dividends.

A tough operating environment

On dividends, Sembcorp Industries’ Chief Executive Officer, Neil McGregor, said:

“We now turn to dividends. Our marketplace continues to be difficult and recovery is still muted. The downturn in the global oil and gas industry continues while pressure on our returns in certain market segments intensifies.”

Indeed, Sembcorp Industries recorded a 10% decline in net profit and an 11% fall in its earnings per share (EPS) for the first-half of 2017. Within the period, marine profit fell 33% year-on-year while utilities profit sank 34%, sending the conglomerate’s net income down.    

Financial matters weigh in

McGregor continued:

“As an asset owner and operator, we have to take a long-term view. This calls for prudence and a disciplined approach to cost, cash flow and balance sheet management.”

For the first half of 2017, Sembcorp Industries recorded negative $202.5 million in operating cash flow and negative $558.6 million in free cash flow. At the end of June, the conglomerate had a net debt position of $7.98 billion ($2 billion in cash and cash equivalents together with $2.6 billion in borrowings).

Sustainable dividends

McGregor said that the 2017 interim dividend would be three cents:   

“We continue to be committed to providing sustainable dividends to our shareholders. And in line with our long-term view, the board has declared an interim dividend of $0.03 per share.”

Sembcorp Industries’ dividend has been slipping since 2014. The historical dividend payout is summarised below:

Source: Sembcorp Industries’ dividend history

In 2014, Sembcorp Industries paid out 16 cents in dividends per share, comprising of a five cent interim dividend and an 11 cent final dividend. As lower oil prices sank in, the conglomerate had to cut its yearly dividend to 11 cents in 2015, and again to eight cents in 2016.    

The latest interim dividend of three cents represents another 25% cut from 2016’s interim dividend of four cents.

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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.