Sembcorp Marine's earnings hit by weak offshore oil and gas sector

Its orderbook dropped to $9.2bn in 1H.

Sembcorp Marine (SMM)’s orderbook has declined to S$9.2bn as at Jun-2016, in tandem with the downturn in the offshore oil & gas industry.

DBS Vickers Securities notes that the firm's order wins of S$3.2bn in 2015 were weak but respectable amid the current environment. 2013 and 2014 saw full-year order wins of S$4.2bn.

According to the research firm, the current orderbook stretches until 2020, but there is risk of order deferments – which would spread revenues and earnings thinner – given that drilling units account for 75% of its value.

"Low oil prices led oil majors and asset owners to defer capex spending, hence, a rebound in oil prices should trigger more order wins for SMM, which would be positive for earnings," it said in a report.