Published February 25, 2009

SembMarine profit surges 78.4%

Revenue up 12.2% to record $5.06b, with rig building contributing most

By VINCENT WEE

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SEMBCORP Marine has put its forex woes behind it and forged ahead with a good set of results, posting a 78.4 per cent rise in 2008 net profit to $429.9 million despite taking a one-off charge of $43.7 million in the fourth quarter for a commercial settlement with BNP Paribas.

Mr Wong: Does not currently foresee any cancellations in orders

Revenue rose 12.2 per cent to a record of $5.06 billion, from $4.51 billion in 2007. Pre-tax profit rose 49 per cent to $545 million due to higher revenue and operating margins from the rig-building and ship-repair businesses, though these were offset by a lower contribution from Cosco. The contribution from Cosco fell 27.8 per cent to $55.5 million, from $76.9 million previously.

Q4 revenue rose 21 per cent to $1.62 billion, while net profit rose to $69.4 million despite a $308.2 million charge arising from forex transactions and related expenses and non-operating expenses and the settlement with BNP Paribas.

Full-year operating profit rose to $501.8 million, as SembMarine's profit margin rose to 12.9 per cent on greater operational efficiency. Gearing up for tough times, SembMarine boosted net cash to $1.83 billion and is keeping a strong liquidity position to capitalise on growth, and merger and acquisition possibilities. A final dividend of six cents per share has been proposed, taking the full-year dividend to 11 cents.

The group also cut back capital expenditure to $100 million in 2008, from $156 million in 2007. Rig building (56 per cent) made up the lion's share of revenue, contributing $2.84 billion.

Next came ship conversion and offshore (27 per cent), contributing $1.35 billion, and ship repair (16 per cent), contributing $794.8 million in sales. Conversion and offshore revenue saw the fastest growth, rising 19.8 per cent from $1.13 billion in 2007.

Amid tight credit conditions, SembMarine expects this sector to take the lead as rig orders slow. The market for floating production, storage and offshore vessel conversion jobs and production platforms remains strong, it said. In preparation for this, SembMarine is making more dry-dock space available and has scaled down shipbuilding operations, with no newbuilds going forward.

This will open up options for a consistent stream of ship-repair jobs, with the average value per job having edged up from $2.9 million to $3 million.

Answering questions on payment deferrals, Semb-Marine president and COO Wong Weng Sun would not disclose schedules and amounts but said: 'For all our rig-building projects we are either cash neutral or cash positive.'

There has been concern about troubled Norwegian oil services company Petromena's ability to pay for the three semisubmersible rigs it has on order with SembMarine. DBS Research last week put Semb-Marine's maximum exposure in the deal at about $1.1 billion. But Mr Wong said yesterday: 'We do not foresee currently any cancellations in orders.'

SembMarine shares closed six cents lower at $1.38 yesterday. Also yesterday, the group announ-ced the resignation of Tan Tew Han as a director and chairman of its audit and special committees and the respective appointments of Lim Ah Doo and Ron Foo.