Sembcorp Marine’s net profit sinks by 89.5% to $11.5m

It was dragged by $35m in forex losses.

The foreign exchange tide was against the marine division of Sembcorp, and it resulted in a huge blow in the firm’s earnings, registering a 24.8% drop in revenue to $908.5m in 2Q.

According to a report by OCBC Research, the forex losses were mainly due to the revaluation of assets and liabilities denominated in Pounds sterling and the USD to SGD.

OCBC added that gross profit margin was 11.7% in 2Q16 vs. 16.5% in 2Q15 and 8.8% in 1Q16.

“S$320m new orders from variation work in 1H16 SMM also secured S$260m in new orders in 2Q16 after clinching S$60m in 1Q16. All of these are variation orders for existing work, and are non-drilling solutions,” OCBC noted.

This brought net order book to $9.2b as at end 2Q16, while excluding Sete Brasil projects, net order book is at $6b.

“Given the poor operating environment, the group has declared an interim dividend of 1.5 S cents, down from 4.0 S cents a year ago; this represents a payout ratio of 47% compared to 39% for 1H15,” the report said.

Meanwhile, OCBC said management took comfort from the fact that there were positive operating cash flows of S$909m in the month of July due to the successful delivery of the Noble Lloyd Noble rig (S$550.8m) and payments for certain floater and offshore platform projects (S$357.9m).