Sembcorp Marine books smaller profit, expects low production activity amid intense competition

Singapore’s offshore rig builder Sembcorp Marine booked a smaller quarterly profit due to lower revenues from the rigs, floaters, and platforms projects. The company expects its production activity to remain low amid intense competition.

SembMarine said on Friday that, in the first three months of 2019, business volume was relatively stable. Higher percentage recognition from ongoing projects and ship repair and upgrade activities were offset by reduced contribution from completion of past projects.

Overall business volume in 1Q 2019 remained significantly below peak levels, the company added.

Sembcorp Marine reported net profit of $2 million for the first quarter 2019, compared with net profit of $5 million for 1Q 2018.

In 1Q 2019, the company’s revenue totaled $811 million, compared with $1.18 billion booked in 1Q 2018. The revenue decline was largely due to lower revenue from rigs and floaters and offshore platform projects, partially offset by higher revenue from repairs and upgrades.

Net order book stands at $5.77 billion as at 1Q 2019. New orders secured in 1Q 2019 totaled about $175 million.

According to the company, global economic growth for 2019 has been projected to moderate as unresolved trade tensions, the effects of tightening monetary policies, as well as geopolitical and macro-economic uncertainties continue to impact business confidence and investments.

SembMarine said that the offshore and marine sector continued to improve. Furthermore, global capex spend for offshore exploration and production (E&P) continues to improve especially for the offshore production segment.

The company added that offshore drilling activities saw some improvement in day rates and utilization levels for some drilling segments.

Despite the improving industry fundamentals, time and effort are required for co-development with prospective customers prior to securing new orders, the rig builder explained.

Sembcorp Marine further stated: “Global capex spend for offshore exploration and production (E&P) continues to improve especially for the offshore production segment. Offshore drilling activities saw some improvement in day rates and utilization levels for some drilling segments.

“Sembcorp Marine is responding to increasing enquiries and tenders for offshore production units, innovative engineering solutions and projects related to the gas value chain.

“The outlook for ship repairs and upgrades continues to improve, underpinned by higher work volume from the new IMO regulations requiring the installation of ballast water treatment systems and gas scrubbers.

“Overall, competition remains intense, and production activity for the Group is expected to remain low.”

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