SINGAPORE (May 13): Sembcorp Marine (SembMarine)’s business operations have been “adversely affected” by Covid-19. The global pandemic has disrupted transportation, supply chains, plant operations, as well as brought about a reduced workforce access, all of which resulted in a lower demand for oil and energy.
This in turn, has led to low overall business volume for the group, and impacted its revenue recognition and bottom line performance, and losses will continue in the "foreseeable quarters", the group reported in its interim business update released on Wednesday.
Additionally, SembMarine reported that the current low and volatile price levels have significantly affected its securing of new orders for the foreseeable future.
Following the collapse of oil prices in March, major oil companies have deferred their final investment decisions (FID) for projects, and slashing their capital expenditure (capex) for 2020.
The cuts in CAPEX have affected the group’s ongoing negotiations and finalisation of new orders, including the Siccar Point Cambo Floating Production, Storage and Offloading (FPSO) project. The project’s FID is now postponed to 2021.
SembMarine said it will continue to “right-size” its resources as they continue to complete their existing projects in progress, and defer all non-essential capex to manage its overall liquidity.
While the group generated positive cash flow from operations in 1Q2020, it remained in a net current liabilities position arising mainly from loans maturing this year. Net financing costs have also increased arising from ongoing refinancing measures.
Looking ahead, SembMarine foresees weaker overall business volumes for all segments for the rest of the year, delayed projects, and lesser new orders owing to the oil price collapse.
The group says it will “continue to focus on safe and timely execution” of its projects and to hunt for “pockets of opportunities” that are less affected by the current business climate. It also expects the previous trend of losses to continue in the foreseeable quarters.
Sembcorp Marine shares closed 0.5 cents lower, or 0.7% down, at 73.5 cents on Tuesday, prior to the announcement.
