SembMarine warns of 4Q net loss amid Marco Polo contract cancellation tussle

It blamed a tough operating environment for the loss.

Sembcorp’s marine arm has had a tough year so far, capped with its contract cancellation dispute with Marco Polo. Now, SembMarine’s 2015 has culminated to a projected net loss in 4Q15 and a contraction in its FY15 net profit.

According to Maybank Kim Eng, SembMarine’s net loss prediction came hot on the heels of a challenging operating environment and increasing postponements of rig orders.

“We continue to expect weak order wins, cancellation risks and unresolved payment issues from Sete Brasil to weigh on the stock,” Maybank Kim Eng said.

Meanwhile, though SembMarine’s contract fiasco with Marco Polo is far from over, analysts from Maybank Kim Eng think it could be setting aside provisions for Marco Polo.

“Other than weaker revenue recognition, we suspect that it may be required to set aside significant provisions for the Marco Polo jackup rig that the latter seeks to terminate. We estimate that SGD35m of EBIT has been recognised,” Maybank Kim Eng added.

“SMM may also take the opportunity to kitchen sink more losses in 4Q15. We thus assume an additional provision of SGD35m in our forecasts, bringing total provision to SGD70m in 4Q15. This brings our 4Q15 PATMI forecast from SGD99m to a net loss of SGD12.6m,” they said.