10 Quick Points Investors Should Know From Sembcorp Industries Limited’s Latest Earnings

In late February, Sembcorp Industries Limited (SGX: U96) released its 2017 fourth quarter and full year earnings update. As a quick introduction, Sembcorp Industries is a bona fide conglomerate with four major business segments: Utilities; Marine; Urban Development; and Others. The Marine segment is made up of Sembcorp Industries’ 61% ownership stake in the Singapore-listed marine engineering firm Sembcorp Marine Ltd (SGX: S51).

Here are 10 things investors should know about Sembcorp Industries’ latest results:

1. Revenue for the reporting quarter improved by 4.8% year-on-year to S$2.123 billion.

2. EBITDA (earnings before interest, taxes, depreciation, and amortization) for the fourth quarter of 2017 fell by 45% to S$213 million from a year ago.

3. Profit from operations for the quarter declined by 61% year-on-year to S$110 million, driven mainly by a S$36.4 million loss suffered in the Marine segment (there was lower business volume and additional cost accruals for floater projects), and a S$25.4 million provision for potential fines related to an overseas water-treatment business.

4. Profit attributable to shareholders for the quarter sank by 84.6% year-on-year to S$22.8 million.

5. The gross margin for the reporting quarter declined from 12.4% a year ago to 7.0%. Similarly, the EBITDA margin fell from 19.2% last year to 10.0% this year.

6. In the reporting quarter, operating cash flow was S$850.9 million, up from the negative S$221.0 million seen in the fourth quarter of 2016. The improvement was mainly due to changes in working capital from better management of inventory and payables.

7. Sembcorp Industries’ net debt declined from S$7.34 billion at end-2016 to S$7.16 billion at end-2017. The net gearing ratio also improved slightly from 0.40 to 0.42 over the same period,

8. The Utilities segment reported a 24% year-on-year increase in revenue to S$1.39 billion for the reporting quarter. The Others segment also saw revenue growth, but at a smaller magnitude of 6% (to S$74 million). The Marine and Urban Development segments were the laggards; revenue for the former fell by 21% year-on-year to S$655 million while revenue for the latter declined 14% to S$3 million from a year ago.

9. To unlock the value of its assets, Sembcorp Industries is planning to divest a number of peripheral assets in its Utilities segment over the next two years. The divestments are expected to deliver cash proceeds of around S$0.5 billion. In addition, Sembcorp Industries is working on a potential IPO (initial public offering) of its energy business in India.

10. Here’s a brief comment by Sembcorp Industries on its outlook that’s given in its latest earnings update:

“The market environment is expected to remain challenging in 2018. A broader-based global recovery is underway, aided by a rebound in investment and trade. As the Group repositions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery.”

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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 Lawrence Nga doesn’t own shares in any companies mentioned.