Sembcorp Industries, the best performing component stock of the Straits Times Index year to date, has reported earnings of $490 million for the 1HFY2022 ended June, over 10 times higher than the earnings of $46 million in the same period before.
The earnings surge was mainly attributable to higher contributions from the group’s renewables and conventional energy segments.
Net profit for the renewables segment increased over three times to $76 million from $24 million thanks to contributions from SDIC New Energy and Shenzhen Huiyang New Energy in China after their acquisitions in January and June respectively. Sembcorp’s wind assets in India and solar operations in Singapore also saw better y-o-y performances.
Meanwhile, the conventional energy segment recorded a net profit of $397 million, up 115% y-o-y from the net profit before exceptional items of $185 million in the 1HFY2021. The higher amount was due to the higher electricity prices in Singapore and India as well as realised gains from favourable gas hedges entered into in 2021.
The earnings surge also includes exceptional items during the 1HFY2022. This comprised the gain on disposal of Subic Water & Sewerage and a write-back of impairment upon disposal of Biowater Technology. It also includes a $6 million gain in the integrated urban solutions segment and $212 million impairment of Chongqing Songzao power plant in the conventional energy segment.
Sans exceptional items, group net profit registered a 94% increase y-o-y.
For the 1HFY2022, Sembcorp’s total turnover increased by 45% y-o-y to $4.76 billion mainly thanks to the increase in turnover for the renewables and conventional energy segments and offset by the lower turnover from its integrated urban solutions segments and other businesses and corporate segments.
Gross profit for the period stood 28% higher y-o-y at $677 million.
Earnings per share (EPS) for the 1HFY2022 stood at 26.88 cents from 2.55 cents in the 1HFY2021 on a fully diluted basis.
As at June 30, cash and cash equivalents stood at $1.27 billion.
Due to its strong underlying performance, Sembcorp has declared an interim dividend of 4.0 cents per share, which will be paid on Aug 23. The interim dividend is two times higher than the 2.0 cents declared in the 1HFY2021.
“Sembcorp’s gross renewables capacity installed and under development globally now stands at 7.1GW, bringing us closer to our target of 10GW of gross installed renewables capacity by 2025. We remain focused on the execution of our brown to green transformation strategy, to deliver lasting value and growth to our stakeholders,” says Wong Kim Yin, president & CEO of Sembcorp.
In its outlook statement, the group says its results for the FY2022 are expected to be “significantly higher” y-o-y.
Underlying earnings for its conventional energy segment in the 2HFY2022 are expected to remain “strong” if market conditions in the 1HFY2022 remain.
Performance of its renewables portfolio in the second half will be underpinned by a full half-year contribution from the China renewables portfolio acquired in 1HFY2022.
That said the ongoing volatility in the commodity markets and tighter monetary policy to control inflation could negatively impact the group’s performance.
Corporate costs are also expected to increase due to rising interest rates and higher borrowing costs arising from the acquisitions of SDIC New Energy and Shenzhen Huiyang New Energy.
Shares in Sembcorp closed 1 cent lower or 0.33% down at $3.01 on Aug 5.