Singapore: Sembcorp Marine Announces Record Net Profit of $860 million

Sembcorp Marine achieved another year of record performance with net profit increased by 23% to a high of $860 million in 2010. Earnings per share rose by 22% to 41.55 cents. Return on equity was 38.4%.

Group turnover at $4,555 million was 20% lower as compared with $5,725 million in 2009. The lower turnover was attributable mainly to lower progressive revenue recognition for the rig building, ship conversion and offshore projects as well as lower variation order settlement in 2010 versus 2009.

Group operating profit at $943 million was 9% higher as compared with $862 million in 2009. The higher operating profit was due to the resumption of margin recognition arising from the sale of the CJ70 harsh environment jack-up rig as well as the execution of repeat rig orders for customers during the year.

At pre-tax level, Group profit increased 19% to hit a record high of above $1 billion mark for the first time at $1,078 million from $908 million in 2009. The increase was attributable to higher profit margin and the receipt of settlement of the disputed foreign exchange transactions with Societe Generale during the year.

OUTLOOK

The Group has a net order book of S$4.8 billion with completion and deliveries stretching till second quarter of 2013. This includes S$3.04 billion in contract orders secured in 2010 and S$361 million worth of contracts secured since the start of 2011, excluding ship repair contracts.

Although global recovery has improved in past months, recent events in the Middle-East and North Africa may create uncertainties in the world economy which may have an impact on businesses.

For the oil and gas industry, the fundamentals remain intact with oil prices expected to sustain above US$80 per barrel. Exploration and production (E&P) spending budgets continue to show positive development with oil companies reporting intention to increase E&P spending further in 2011.

Given the highly skewed ageing rig fleet and the bifurcation in the jack-up market with oil companies increasingly focused on new, safer and efficient rigs, demand for premium and high specification rigs is expected to remain strong. The Group has since the fourth quarter of 2010 secured eight firm orders of jack-up rigs amounting to S$2.0 billion with options for another ten units.

While drilling activities in the Gulf of Mexico have slowed pending finalization of deepwater drilling regulations, deepwater drilling activities for the rest of the world are expected to increase. This optimism is reflected in the number of newbuild orders, in particular for drillships, by drilling contractors since the last quarter of 2010. Sembcorp Marine, with its proven track record in deepwater rigs, will be well-positioned to capture new orders and meet the industry’s most stringent operating requirements.

Overall enquiries have improved though competition remains keen.

The ship repair market continues to improve with continued demand for bigger docks. The Group has secured several long-term contracts from its customers, in particular in the niche segments for the repair, upgrading and life extension of LNG carriers and passenger/cruise vessels. These long-term customers will continue to provide a stable base-load for the Group’s ship repair sector.

[mappress]

Source:Sembcorp, February  23, 2011;