Struggling Sembcorp turns sails overseas for growth as competition heats up locally

Marine operations dragged Sembcorp to a lull.

This year had been a tough one for Sembcorp, headline by its marine arm which was buffeted by industry headwinds and a continuously escalating contract cancellation dispute with Marco Polo.

Its local power business was also disappointing this year, plagued by an overcapacity issue which resulted in lower power spreads, according to a report by OCBC.

“The marine segment also dragged overall profits down due to the weak operating environment. In addition, the Indian TPCIL plant saw some initial operating losses, which is not surprising given that the plant is within its first year of operations,” OCBC said.

But 2016 may be the year Sembcorp turns the tide, OCBC says, as it is projected to be a better year for its overseas utilities.

“We expect 2016 to be a better year for the Indian plant as it overcomes teething problems; management had also earlier guided that the plant should be close to breakeven this year,” OCBC said.

OCBC added that other overseas earnings boosts are on the way for Sembcorp, while stiff competition may persist in Singapore’s domestic power market.

“In the longer term, SCI has been expanding its operations steadily over the years in both the utilities and urban development segments, and we are positive on the long-term prospects of the group, given its good track record and sensible strategy of pursuing emerging market growth,” OCBC said.