After reporting a higher net loss in FY2020 compared to FY2019 impacted by decreasing revenues due to lower activity and project stoppages and delays caused by Covid-19, Singapore’s offshore construction specialist Sembcorp Marine expects losses to continue.
In its financial report on Tuesday, Sembcorp Marine emphasised that no existing projects were cancelled due to the Covid-19 pandemic. However, group revenue was severely hit by the project stoppages and delays.
Despite a revenue upturn in 4Q 2020, full-year revenue was S$1.51 billion, which is 48 per cent lower than revenue booked in the prior year, which totalled S$2.88 billion.
The decline in revenue for FY 2020 was mainly due to lower revenue recognition from Rigs & Floaters and Repairs & Upgrades projects, mitigated by higher revenue recognition from Offshore Platforms and Specialised Shipbuilding projects.
The lower revenue recognition was due to delays in the execution and completion of existing projects.
With the decline in revenue, and including asset impairments and provisions made in 4Q 2020, the group registered a higher net loss of S$583 million for the full year 2020 compared to S$137 million loss in FY2019.
A total of S$162 million (pre-tax) of asset impairments and provisions were recorded in 4Q 2020. On a post-tax basis, the impairments and provisions amount to S$144 million.
These include an increase in provisions of S$74 million for reinstating the group’s vacated Tanjong Kling Yard; an increase in an impairment loss of S$49 million on a marine vessel; a write-down of inventory relating to jack-up equipment amounting to S$34 million; and an expected credit loss on receivables of S$5 million.
As at end-2020, Sembcorp Marine has a net order book of S$1.82 billion. This comprises S$1.51 billion of projects under execution and S$0.31 billion of ongoing Repairs & Upgrades projects with firm deliveries in 2021.
Sembcorp Marine said it will continue to further diversify its business portfolio from drilling-focused activities and extend into new areas of renewable energy, electrification, gas value chain, ocean living, as well as carbon capture and storage solutions.
It is worth reminding here that Keppel, Sembcorp Marine’s rival in the offshore construction business, has recently revealed that its struggling Keppel Offshore & Marine unit will exit the offshore rig building business as the company positions for the global energy transition.
The goal is to create a slimmer and more competitive Keppel O&M that is well-placed to support the energy transition.
Sembcorp Marine expects losses to continue
According to Sembcorp Marine, despite the present trajectory of a gradual economic recovery, it remains premature to predict a strong and sustainable recovery for the industry.
Sembcorp Marine expects losses to continue. However, the group will continue its strategic initiatives to build business resilience and position itself for future growth.
As global players in the world’s energy system transform and pivot in favour of cleaner energy and build the appropriate energy infrastructure, it is anticipated that there will be increasing green opportunities, the company noted.
Sembcorp Marine believes it stands poised to benefit from this transition with innovative and sustainable solutions, underpinned by its technology bench strength across the global offshore, marine, and energy value chain.