SembCorp Posts Small Profit Rise

Tuesday, February 13, 2001
SembCorp Marine Ltd. (SCM), Singapore's largest ship repairer, posted a small rise in its 2000 net profit, in line with market expectations. SCM, 63 percent owned by conglomerate SembCorp Industries Ltd. with a market value of about S$1.1 billion, said last year's net profit was S$80.16 million, up 2.3 percent from 1999. Its bottom line was boosted by a one time gain of S$6.5 million from the sale of shares in Jurong Technology Industrial Corp. early last year and a writeback of tax over provisions of S$4.7 million. Analysts have a consensus 2000 forecast of S$81.5 million, according to Multex Global Estimates. The forecasts ranged from a low of S$71.5 million to a high of S$86.8 million. SCM fared much better than its smaller rival Keppel Hitachi, which reported a 50 percent slide in 2000 earnings due to a weak ship repair market. SCM said lower turnover was due to smaller contributions from the shiprepair business and a divestment of JTIC after its public listing last year. Tan Kwi Kin, president of SCM, told a news conference that group revenue was expected to improve by five to 10 percent from last year, helped by shiprepair and newbuilding businesses. He said about S$450 million of orders were expected to come from shiprepair, and about S$400 million would come from newbuildings, conversions and offshore businesses this year. The firm's outstanding order book stood at S$1 billion for the next two years, he said, with some S$400 million of the orders to be recognized in 2001. Wong Kok Siew, chief executive officer of SembCorp Industries, said the group had also budgeted S$100 million for capital expenditure this year, of which about 80 percent would be used to expand into Brazil, China and the Middle East through acquisitions. The balance of S$20 million would be used domestically for system upgrading. Wong said SCM was generating good cashflow and there was no need to raise funds for its expansion plans. Overseas contributions, accounting for less than 10 percent of group revenue, was expected to rise to 30 to 40 percent in five years, through its expansion plan. Deputy president Heng Chiang Gnee said its shiprepair business was reaching full capacity, and customers which arrived on short notice, had to be turned away in the last few weeks. For 2001, the group said it expected to maintain its performance. It said in a statement accompanying its results that the shiprepair market was expected to improve in 2001, but keen competition could put pressure on its operating margins. Last year, the shiprepair business accounted for 50 percent of the group's business, offshore business and ship conversion contributed 32 percent, with shipbuilding and others making up the rest. On its intention to merge with Keppel Hitachi Zosen, Wong said a consolidation in the Singapore shipyard industry remained valid because of global competition. – (Reuters)
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