Singapore-listed offshore services provider Sembcorp Marine suffered a drop of 15.2% year on year to SGD108 million (USD81.8 million) in its profit for the first quarter ended 31 March 2015.
The company’s revenue also saw a dip of 2.4% to SGD1.3 billion in the first quarter of 2015, compared with SGD1.33 billion in the first quarter of 2014. The decrease in revenue is mainly due to the lower revenue recognition for rig building projects and lower average revenue per repair vessel despite the increase in the number of ships repaired, mitigated by higher revenue recognition for offshore and conversion project.
Similarly, Sembcorp Marine’s gross profit fell by 0.9% to SGD169.1 million in first-quarter 2015 from SGD170.6 million in the same period last year. The drop in gross profit was attributed to lower contribution from rig building and repair projects, offset by higher contribution from offshore and conversion projects.
Going forward, Sembcorp Marine will focus on cost and capital management in the challenging year ahead. The company is facing the scarcity of new orders as oil companies reduce their global exploration and production expenditure.
In the meantime, the offshore industry has entered a period of cash conservation and companies have consolidated their offshore fleet operations as charters are not renewed or are renewed at significantly lower rates. Therefore, the entry of new rigs faces the prospect of not securing charters despite their higher technical specifications and superior capabilities.
Meanwhile, the company is affected by its exposure in the Brazil’s oil and gas industry, which is shrouded by uncertainty. Sembcorp Marine will engage with its customers to find the best way forward for its drillship projects and explore all options, including slowing down the construction.
Currently, Sembcorp Marine’s net orderbook stands at SGD10.6 billion with deliveries stretching into 2019.