Sembcorp Marine had a difficult year battling the challenges brought on by the Covid-19 pandemic, the company said in a Singapore Stock Exchange filing on Tuesday, February 23.
Singapore's Covid-19 containment measures implemented in April led to extended production stoppages and consequent delays in project execution and completion. Production activities resumed gradually from early July 2020 to reach almost full workforce levels near the end of November.
Sembcorp said it engaged all its global customers and no existing projects were cancelled. However, group revenue was severely hit by the project stoppages and delays.
Despite a revenue upturn in the fourth quarter of 2020, full-year revenue was SG$1.51 billion (US$1.14 billion), 48 per cent lower than revenue booked the prior year. With the decline in revenue, and including asset impairments and provisions made in Q4 2020, the Group registered a higher net loss of SG$583 million (US$441.4 million) for the full year (FY 2019: SG$137 million loss).
Asset impairments and provisions
Following a periodic review of the group's assets and the assumptions used to assess the carrying values of assets, a total of SG$162 million (US$122.6 million) (pre-tax) of asset impairments and provisions were recorded in Q4 2020. On a post-tax basis, the impairments and provisions amount to SG$144 million (US$109 million).
These include:
Financial review
With the impairments and provisions, Sembcorp registered a net loss of SG$390 million (US$295.2 million) for the second half of 2020 and closed the year with a net loss of SG$583 million. Excluding impairments and provisions, the net loss for H2 2020 and FY 2020 was SG$246 million (US$186.2 million) and SG$439 million (US$332.3 million), respectively.
Reflecting the significantly lower activities due to the Covid-19 impact, the group recorded revenue of SG$604 million (US$457.3 million) and SG$1.51 billion (US$1.14 billion) for H2 2020 and FY 2020, respectively. The half-year revenue was 55 per cent lower compared to the prior period while the full-year revenue was 48 per cent lower year-on-year.
The decline in revenue for FY 2020 was mainly due to lower revenue recognition from rigs and floaters and repairs and 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.
Operations review
Sembcorp Marine started 2020 with a net order book in excess of SG$2 billion (US$1.51 billion) with completion and deliveries stretching into 2022. However, the pandemic-led slowdown resulted in a push-out of delivery dates for most ongoing projects, with some rescheduled by as much as 12 months.
Successful delivery of projects
Despite the operational challenges encountered in 2020, the group successfully completed a number of greener solutions, namely the Tangguh LNG modules in June 2020, the offshore windfarm jacket foundations for the Hornsea Two project in August 2020, and CNTIC VPower Energy, a floating storage unit, towards end-2020.
As at end-2020, the group has a net order book of SG$1.82 billion (US$1.38 billion). This comprises SG$1.51 billion (US$1.14 billion) of projects under execution (with a total original contract sum of SG$6.5 billion – US$4.9 billion) and SG$0.31 billion (US$0.23 billion) of ongoing repairs and upgrades projects with firm deliveries in 2021.
Ongoing order developments
Sembcorp added that oil prices have staged a gradual recovery on the back of an anticipated global economic recovery and underpinned by the hope that the Covid-19 pandemic will retreat as vaccination programmes are rolled out across the globe. This has provided impetus for stepped up reviews of deferred activities and final investment decisions (FIDs), as well as re-appraisals of new investments and capital spending.
With the improvement in overall sentiment, the group has been in active discussions with customers on the resumption of activities, including FIDs on deferred projects.
New opportunities are also opening up with an increase in tender activities since Q3 2020. The group is actively tendering for more than 10 projects in the greener energy market segments, such as renewable energy and gas solutions.
A similar number of tenders are also in progress for the process solutions segment (including FPSOs and FPUs).
The group's repairs and upgrades business has also experienced increasingly active enquiries and secured more orders.