Sembcorp’s Utilities business achieved a significant year-on-year improvement, while its Urban Development business maintained a stable performance with record earnings. On the other hand, the company’s Marine business continues to suffer from the overall weak marine industry.

Performance Drivers (Positive Factors)

• Utilities Business

Accounting for the majority of Sembcorp’s overall net profits, the company’s Utilities business recorded a net profit of SGD 312 million in FY 2018, more than double the SGD 140 million in the previous year.

Part of this significant growth was due to its India operations achieving a turnaround to profitability, delivering a net profit of SGD 47 million compared to last year’s losses. The business continues to make progress in firming up long-term power sales in India, as well as in Bangladesh.

Meanwhile in Singapore, Sembcorp extended its gas business to include liquefied natural gas importation, grew their solar capacity to more than 120 megawatts and entered the Open Electricity Market as a power retailer.

Further, in the UK, the company acquired the country’s largest flexible distributed energy player, UK Power Reserve, which will pave the way for Sembcorp into this new growth niche.

• Urban Development Business

Sembcorp’s Urban Development business increased its net profits by 3.6% to reach a record high of SGD 86 million in FY 2018. This was mostly driven by land sales in Vietnam and China. The company also attained a record 425 hectares for its net order book in FY 2018. This 425 hectares will be recognized as land sales over the next two to three years.

Performance Drivers (Negative Factors)

• Marine Business

The worldwide offshore and marine industry is facing challenging conditions as it continues to undergo cyclical and structural shifts. This has affected Sembcorp’s Marine business, which recorded a net loss of SGD 48 million in FY 2018, compared to the net profit of SGD 157 million in FY 2017. This result was mainly due to low overall business volume and a loss from the sale of a semi-submersible rig. Nevertheless, this loss was partially offset by margin recognition from new projects and rig deliveries.

Going forward, overall business volume and activity has been projected to remain relatively low, but at a more stabilized rate. Although offshore drilling activities have increased, the market remains over-supplied and Sembcorp expects a lag period before offshore rig orders recover. Meanwhile, to prepare for future new orders, the company is forecasting an increase in working capital needs. As a result, Sembcorp is already taking steps to manage costs, cash flows and financial gearing.