Sembcorp Marine (SembMarine) has reported a higher net loss of $582.5 million for the FY2020 ended December, compared to the net loss of $137.2 million in the FY2019, due to lower overall revenue and $162 million of asset impairments and provisions recorded in 4QFY2020.

The provisions include an increase in provisions of $74 million for reinstating the group’s vacated Tanjong Kling Yard, an increase in impairment loss of $49 million on a marine vessel, a write down of inventory relating to jack-up equipment amounting to some $34 million, and an expected credit loss on receivables of $5 million.

For the 2HFY2020, the group posted a higher net loss of $390.4 million, from the $130.3 million in the same period a year ago.

Excluding impairments and provisions, net loss for 2HFY2020 and FY2020 would have stood at $246 million and $439 million respectively.

The higher net losses, according to the group, were also due to the negative impact of the Covid-19 pandemic, which delayed the execution of projects. During the period, the group also recognised higher costs for rigs and floaters as well as specialised shipbuilding projects. The losses also include inventories that were written down, impairment loss on a marine vessel and impairment on right-of-use assets.

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The lower figures were partly offset by profit from offshore platform projects, the repairs and upgrades business, as well as government grants for the Covid-19 pandemic.

Group turnover – or revenue – for the 2HFY2020 and FY2020 fell 55% and 48% y-o-y to $604 million and $1.51 billion due to the lower activities that came about due to the Covid-19 pandemic. The group’s production activities were halted in mid-April 2020 due to Covid-19-related restrictions. Activities resumed gradually from early July 2020.

The lower revenue for FY2020 was also due to lower revenue from Rigs & Floaters and Repairs & Upgrades projects owing to delays in the execution and completion of existing projects. This was mitigated by higher revenue from the group’s Offshore Platforms and Specialised Shipbuilding projects.

For the 2HFY2020 and FY2020, the group reported higher gross loss of $296 million and $490 million respectively, from $118 million and $92 million in the corresponding periods a year ago.

The higher gross losses were attributable to inventories being written down to net realisable value for rig building project stock, compared to inventories being written back a year ago.

Loss per share for 2HFY2020 and FY2020 stood at 4.60 cents and 10.88 cents respectively.

As at end-December, the group’s net order book stood at $1.82 billion. None of its existing projects were cancelled during the year.

The group is currently tendering for over 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 floating production storage and offloading or FPSOs and floating production units or FPUs).

The group says its Repairs & Upgrades business has also experienced increasingly active enquiries and secured more orders.

SEE: Sembcorp Marine to make material provisions in 4Q20 in profit guidance

In the 2HFY2020, the group generated negative cash flow from operations due to lower operating cash inflows arising from lower operating activities, as well as higher working capital needs due to delays in milestone achievement or delivery of projects.

The completion of the $2.1 billion rights issue, which took place alongside the demerger from Sembcorp Industries, was “timely”, according to the group.

Of the net proceeds of $0.6 billion from the rights issue, approximately $0.1 billion has been used for working capital purposes as at the end of FY2020. The net debt to equity of the group as at Dec 31, 2020 was 0.75 times.

No final dividend has been declared for the FY2020, same as FY2019, in a bid to conserve cash.

Cash and cash equivalents as at end-December stood at $772.4 million, higher than the $389.3 million a year ago, mainly due to proceeds from the rights issues.

In its outlook statement, SembMarine says it expects its losses to continue amid the gradual recovery in the economy.

“However, the group will continue its strategic initiatives to build business resilience and position itself for future growth,” says president and CEO at SembMarine, Wong Weng Sun, in his speech.

“As global players in the world’s energy system transform and pivot in favour of cleaner energy, and build the appropriate energy infrastructure, it is anticipated that there will be increasing green opportunities. Sembcorp Marine stands poised to benefit from this transition with innovative and sustainable solutions, underpinned by its technology bench strength across the global offshore, marine and energy value chain,” Wong adds.

“Sembcorp Marine has demonstrated an ability to adapt and reinvent ourselves over the years. We delivered healthy profits consistently before the collapse of oil price in 2015. I believe we have both the resolve and ability to pivot and manage the Group’s strategic transition, to capture new and emerging opportunities from the continuing global transition towards clean energy and other green solutions, growing scale and profitability over time.”

Shares in SembMarine closed flat at 15.2 cents on Feb 22.