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Sembcorp Marine Ltd’s Latest Earnings: What Investors Need to Know

Sembcorp Marine Ltd (SGX: S51) specialises in providing turnkey solutions for products such as rigs and floaters, and performing repairs and upgrades of vessels, marine and offshore structures.

Yesterday, the company announced its financial results for the full-year ended 31 December 2017.  Here’s a quick rundown of the financial figures from the year:

1. Revenue tumbled from S$3.5 billion in 2016 to S$2.4 billion in 2017, down 32.7% year-on-year.

2. Net profit plunged 82.1% to S$14.1 million.

3. Consequently, earnings per share for 2017 came in at 0.67 Singapore cent, down from 3.77 cents one year ago.

4. As at 31 December 2017, Sembcorp Marine had S$1.3 billion in cash and cash equivalents, and S$4.1 billion in total debt. This gives a net debt position of S$2.8 billion. In comparison, at the end of 2016, it had S$2.9 billion in net debt.

5. Cash flow from operations was S$49.6 million and S$177.9 million was spent on capital expenditure. Therefore, the oil rig builder had a negative S$128.2 million in free cash flow for 2017. A year ago, it performed better as it raked in a free cash flow figure of S$147.1 million.

In all, it was a very poor 2017 for Sembcorp Marine.

The company’s top-line was lower year-on-year mainly due to lower sales from all main business segments, except Repairs & Upgrades. Also, a reversal of previously recognised rig sales upon the termination of contracts with the original customers added to the fall.

Rigs & Floaters reported a 42% decline in revenue to S$1.1 billion due to lower turnover from drill ships, other rigs and floaters. Offshore Platforms revenue fell 34% year-on-year to S$732 million on the back of lesser projects on hand. The only bright spot came from Repairs & Upgrades where revenue rose 3% to S$471 million. Even though fewer ships were repaired, the average sales per vessel rose due to “an improved vessel mix with more higher-value works”.

Meanwhile, the bottom-line was affected due to a fall in overall business volume. The lower volume impacted the absorption of overhead costs and additional cost accruals made during the fourth quarter for floater projects, which are pending finalisation from clients.

The company has proposed a final dividend of 1.0 Singapore cent per share. Together with the interim dividend of 1.0 cent already paid out, the total dividend for 2017 would be 2.0 cents, down from 2.5 cents dished out in 2016.

Looking ahead, Sembcorp Marine said:

“Global exploration and production (E&P) capex spending continues to show signs of improvement, underpinned by higher oil prices.

However, the immediate outlook remains challenging. It will take some time for capex spending to translate into new orders. Industry activities remain low and competition for orders remains intense. Sembcorp Marine will continue to further strengthen its balance sheet and actively pursue the conversion of enquiries into new orders.”

Sembcorp Marine’s shares are currently changing hands at S$2.49. This translates to a trailing price-to-earnings ratio of a whopping 372 and a trailing dividend yield of 1.2%.

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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 Sudhan P doesn’t own shares in any companies mentioned.