Sembcorp’s spark fizzled out in Q3 after 23% profit plunge

The group’s debt has also surged.

Sembcorp Industries’ Q3 results took a hit from intense competition in Singapore’s power sector. Sembcorp’s profit plunged 23% year-on-year to $197m in Q3, as spark spreads fell 33% year-on-year.

Net profit from the utilities business fell 34% year-on-year to $114.2m, while marine saw a 2% rise to $80.0m in the quarter. Meanwhile, urban development saw a 114% rise in net profit to $4.9m.

According to OCBC, competition in the Singapore power market continues to be intense and is expected to affect the performance of the utilities business. However, overseas operations, which accounted for about half of utilities net profit in 9M14, are expected to grow.

“With the consolidation of TPCIL (SCI’s first power plant investment in India) which became a subsidiary in Jul 2014, as well as higher borrowings from the marine segment, SCI’s balance sheet has become more leveraged; at 3Q14 the group was in a net debt position of S$2.3b vs. just S$49m in 2Q14.

“We do note, however, that about 43% of its total debt is long-dated and repayable after five years. We also expect more cash inflows as more plants come on-stream. After taking into account SMM’s lower fair value since our last update, as well as SCI’s net debt position, our SOTP-based fair value estimate drops from S$5.64 to S$5.00,” stated OCBC.

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