Singapore's Sembcorp Marine Ltd. recorded a net profit of $8.1 million (SGD 11 million) for second quarter 2016 (2Q 2016), down 90 percent from $80.7 million (SGD 109 million) in the corresponding period last year, with the fall attributed largely to lower margin caused by a decline in revenue recognition from rig building projects, the company said Thursday in the release of its financial results.
"Foreign exchange translation of $23.7 million (SGD 32 million), higher finance costs, impairment loss of $5.9 million (SGD 8 million) on investment shares held and share of losses from associates also impacted earnings," the company said.
Turnover in 2Q 2016 shrank 25 percent year-on-year to $672.2 million (SGD 908 million) against $890 million (SGD 1.208 billion). The weaker performance was due to lower revenue recognition from rig building projects, lower average revenue per vessel repaired for Repairs & Upgrade segment. This was however offset partially by higher revenue recognition from Offshore Platforms and Floaters projects.
Sembcorp Marine's revenue from its Rig & Floaters business fell 46.3 percent in 2Q 2016 to $307.7 million (SGD 415.7 million), compared to $572.9 million (SGD 773.9 million) amid lower revenue recognition for rig building projects resulting from customers' request to defer delivery. The Repairs & Upgrades unit also posted a 12.1 percent revenue decline to $107.9 million (SGD 145.7 million) from $122.7 million (SGD 165.7 million).
Meanwhile, the Offshore Platforms sector generated a 31.1 percent gain in 2Q 2016 revenue to $243 million (SGD 328.3 million), up from $185.3 million (SGD 250.3 million) last year.
Moving on to work secured in the first half of 2016, Sembcorp Marine secured $236.9 million (SGD 320 million) in new contracts, all non-drilling solutions. This brought its net order book year-to-date to $6.8 billion (SGD 9.2 billion).
"Looking ahead, we expect conditions in the offshore oil and gas sector to remain challenging in the short to medium term. Due to low oil prices and reduced day rates, many companies in the offshore oil and gas sector continue to face slowing demand, difficulties in replenishing their order books as well as deferment or cancellation of their existing contracts," Sembcorp Marine President & CEO Wong Weng Sun said.
"Despite these tough conditions, we believe that the long-term fundamentals of the industry remain strong and opportunities still exist even during this down-cycle," he added.
Turning to the workforce, Sembcorp Marine revealed that it will continues to rigorously optimize its manpower requirements. The firm will reallocate headcounts from the drilling segment to the non-drilling segments to support its large projects, where production activities remain high.
"We will continue to allow natural attrition and removal of less efficient sub-contractors to help optimize our workforce needs," Wong said.
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