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Asia300

Singapore's Hyflux bound for annual loss on soft power prices

Water treatment company to spin off consumer business

Olivia Lum, left, Hyflux's executive chairman and group CEO.

SINGAPORE -- Singapore's Hyflux is likely to report a loss for the year ending in December as weak power prices at home look set to dampen profitability for the rest of the year.

The water treatment company on Thursday announced a net loss of 25.1 million Singapore dollars ($18.4 million) for the April-June quarter, compared with a S$2.6 million net profit a year earlier. This is the company's first quarterly loss since going public in 2001, a spokesperson said.

A desalination and power generation plant that Hyflux owns and operates in western Singapore, called Tuaspring, contributed S$20.9 million to the loss. The city-state's weak power prices were a major culprit. Prices have been low owing to a glut of gas and aggressive pricing by power generators. Revenue for the quarter tumbled 65% to S$81.7 million. The engineering, procurement and construction (EPC) business for water and power plants incurred losses too, due to lower revenue recognition on existing projects.

For the six months to June, revenue fell 62% on the year to S$173.2 million. The company reported a net loss of S$24.2 million after a S$9.9 million profit a year earlier.

"We expect losses in the next two quarters," Hyflux said in a statement. "Continued weakness in the Singapore power market is expected to adversely affect the group's performance for the rest of 2017."

Hyflux is in the process of divesting from the Tuaspring plant. Despite the plant's weak performance in the quarter, interest is strong with some 40 to 50 bidders lining up, Chief Financial Officer Lim Suat Wah said at a press conference. "It is a very stable infrastructure project. Investors are looking at this from a long-term perspective," Lim said. The company aims to complete the sale by the end of the year.

Executive Chairman and Group CEO Olivia Lum said the company is still "aggressively bidding" for new EPC projects in the Middle East and Sri Lanka worth some S$1.8 billion.

Lum also said the company plans to spin off the still-nascent consumer health business, in which the company processes and sells oxygen-rich water, to improve the focus of the operation's management. A public listing is targeted for early next year, most likely on Catalyst, the Singapore Exchange's market for emerging companies. Following the entry into the consumer health and beauty business in late 2015, revenue in the segment grew to "a couple million dollars" in the first half, according to Lum. "This is a high growth segment," she said.

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