Sembcorp Marine says it expects to incur further losses in its 2HFY2021 ending 31st Dec, in addition to the $647 million loss it reported in its 1HFY2021 results.
In 1HFY2021, the company said the disruption of supply chains and workforce reductions had affected its productivity and impacted the progress of its projects, resulting in delays and unforeseen cost overruns.
In a release, Sembcorp Marine said while it has made some progress in managing the delays in project completions, shareholders should note that Covid-19 related measures continue to have a serious impact on the Group’s performance.
In the third quarter of 2021, Sembcorp Marine has encountered further execution challenges, “including delays in delivery of equipment arising from border controls in certain countries and the purchase of new components requiring a longer lead time due to supply chain constraints.”
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It also faced slower than expected recruitment of additional skilled labour, continued attrition of skilled workers; and work disruptions, including stop-work orders, resulting from measures taken to address the recent Covid-19 spikes.
These factors have resulted in further delays and increased projected costs to complete these projects over the next three to nine months.
It then elaborated that of the 16 projects under execution by Sembcorp Marine, five projects have been further delayed by between one to three months.
As such, Sembcorp Marine is likely to incur further cost overruns of a “material amount” and is currently in negotiations with its counterparties, and taking other measures to mitigate these cost overruns.
The company says that the increased costs to complete the projects, as well as the losses arising from the added delays, “will result in significant losses for 2HFY2021, which could potentially be in the range of the losses reported for 1HFY2021.”
Sembcorp Marine highlighted it only be able to quantify the actual losses closer to the end of the financial year, as much will also depend on the performance in the last quarter of 2021.
The magnitude of losses incurred will depend on many factors, including the continuing impact of Covid-19 measures on the construction progress of the projects, taking into account the availability of labour, the health of workers and supply chain delays.
It will also depend on the results of ongoing negotiations with counterparties on revised delivery dates; and unexpected disruptions which may occur due to factors outside of Sembcorp Marine’s control.
Sembcorp then expressed its commitment to “ride through this difficult period,” asking for “the support and patience of all its stakeholders” and believes that its diversification and expansion into the clean energy sector will provide a foundation for it to achieve sustainable growth.
Shares of Sembcorp Marine closed at 8.1 cents on 19 Oct , down 0.1 cents or 1.22% lower than its previous close.