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Sembcorp profits tumble on industry downturn, market disruptions

Utilities, marine businesses fall by over 30%, partially offset by strong urban development segment

Sembcorp announced a net profit of 174.3 million Singapore dollars ($128.1 million) for its first half ending in June.

SINGAPORE -- Singapore's Sembcorp Industries announced a net profit of 174.3 million Singapore dollars ($128.1 million) for its first half ending in June, down 9.9% on the year. Slow demand for its core oil rig-building business due to low global oil prices and a weaker utilities business arising from its India business were behind the dip.

Its urban development segment was the best performing segment, registering a 516% gain to S$45.7 million. However, it was not enough to offset the decline from its utilities and marine business.

The utilities business, which includes power and water-treatment plant operations and development in countries such as China and India, affected its bottom line. While its Singapore business performed well, it was not enough to offset the decline from its India business which is seeing a current power surplus in the market. The company said in a press release that its second thermal power plant in India has yet to secure long-term power purchase agreements and "is expected to incur losses for the year. ... Industry utilization is expected to improve in the medium term." 

The company's marine construction business, which includes the building of oil rigs and ships, also did not fare well. It saw a 33% decline in net profits to S$27.4 million on the year. The losses were due to lower contributions from rig building projects and impairment.

Neil McGregor, group president and CEO of Sembcorp Industries, noted that the company recognizes the need to be prudent and agile, as it faces a "deep industry downturn on one hand and market disruptions on the other."

Sembcorp is looking into other areas of growth such as renewable energy as it seeks to lift its bottom line. Last month, it announced that a subsidiary had acquired Solar C&I Holdings, which owns two grid-tied rooftop solar assets, for S$3.3 million from REC Solar. McGregor said that this it is in line with Sembcorp's goal to "grow solar power capacity through more self-development and acquisition projects."

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