SembCorp Industries Looks To Become A Global Contender

Monday, October 11, 1999
Diversified SembCorp Industries Ltd., fresh from sales of key non-core assets, is hunting for foreign partners in its bid to become a global contender in its core businesses, President Wong Kok Siew said. Already Asia's largest shipyard operator, SembCorp is confident about meeting its internal target of not less than 20 percent growth in net profit per annum and has set its sights beyond Asia. "With the major divestments of non-core over, our game plan is simple -- to grow the group as we move forward," Wong, who is also the group's chief executive, said. The year-old entity of government-owned Singapore Technologies Industrial Corp and Sembawang Corp has made estimated proceeds of $340.5 million from its non-core asset sales so far this year. SembCorp's shipyard operations, under Jurong Shipyard, have to restructure further in the face of increasing challenges from low-cost Chinese yards, Wong said. "We are going to restructure Jurong and Sembawang to be more competitive and more importantly, cost-effective," he said. SembCorp owns the largest shipyard in the region, outside Dubai, with a capacity of 1.8 million dwt. "We want to do more with the restructuring because I want to bring my ROE (return-on-equity) up. I know the competitors are moving very, very quickly," Wong said. "I just visited some shipyards in China, I can tell you they are catching up fast. Our window of dominating this industry for the shiprepair side is closing very quickly," he added. Wong said his worry was that the current restructuring might not be enough to ward off rival Chinese yards. "Beyond that, we have to look at the whole global industry. I think beyond that we may have to do further restructuring. Because I see major trends," he said. "I think the whole industry will eventually have to shift. I can only speak for our own restructuring first. But I certainly believe with the global trend coming, with China moving ahead in terms of costs, systems, I think the ship repair business in Singapore needs to be restructured." The group would be announcing details of the merger of its two yards by November. SembCorp is in talks with several big European or American firms to form partnerships within a year or two to boost its engineering, construction (E&C) and logistics capabilities. These alliances, including mergers and acquisitions, could be by way of share exchanges or strict partnership basis, Wong said. "We are looking in the E&C business for one or two strategic partners where we can go with them to do all the regional projects together. We want to be like a Fluor Daniel or a Bechtel in terms of Asian Bechtel or Asian Fluor Daniel," he said. On the logistics front, SembCorp, which was already working with General Electric Co. and Procter & Gamble in China, is seeking two partners - one in Europe and one in North America - to form a global network. Wong said SembCorp was in discussion with one potential logistics partner. On plans to pare down its 42.37 percent stake in Internet Service Provider (ISP) Pacific Internet to five to 10 percent, Wong said IT remained a core operation. "Our systems integration would continue to do well. Singapore Computer has stated it would move forward and attain 20 percent growth because of Y2K (Year 2000). Beyond that, we want to be a major e-commerce player." As to why the group was looking for a strategic partner to grow Pacific Internet while holding a minor stake, he said: "We have to be humble. It is a global business. We can't drive it. We don't have the telecom license in Singapore nor the region. We don't have the satellite, the content or the cable company that can take it further."
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