LNG

Sembcorp Marine posted a net loss of S$192 million (US$138.3M) for the six months to June 2020, following the “severe deterioration” of activities at all its Singapore yards as a result of the Covid-19 pandemic and amid a planned de-merger from parent Sembcorp Industries.

Sembcorp Marine’s results in the same six months of 2019 had amounted to a loss of S$7M.

The first-half 2020 earnings showed group revenues were S$906M and the net order book had S$1.91Bln of work outstanding, including liquefied natural gas sector ships such as LNG-powered vessels, bunkering ships and floating LNG storage.

A total of 74 vessels were repaired or upgraded at Sembcorp Marine yards in the 2020 first half, less the half the total of 153 vessels in the first six months of 2019.

The Sembcorp construction and conversion work for LNG mainly affects projects involving joint ventures of Japanese shipping company Mitsui OSK Lines.

Since April, when the Singapore government imposed its Covid-19 “circuit breaker” measures, in particular movement restrictions that disallowed migrant workers from leaving their dormitories for work, there was a substantial reduction in the group’s operating yard workforce (including sub-contractors) from about 20,000 to 850 persons.

Sembcorp Marine’s Singapore yards had to stand down and discontinue production activities, resulting in significant delays to project executions.

As a consequence, all divisions posted losses for the six months period, with the exception of Repairs & Upgrades which reported higher profits.

The company said Specialised Shipbuilding revenue was S$35M, up from S$7M in the year-ago period on higher earnings for Roll-On-Roll-Off passenger (Ropax) ferries as well as the LNG bunker vessel projects.

Revenue from Repairs & Upgrades totalled S$258M, which was 5 percent higher than the $245M in the 2019 first half.

This was due to higher revenue per vessel at S$3.49M from several upgrade projects for floating storage and regasification units (FSRU) and cruise ships.

Revenue for the Rigs & Floaters segment was S$459M, well down on the S$1.22Bln recorded in the 2019 first half.

Offshore Platforms revenue was S$130M. This included platforms successfully delivered for the Tangguh gas modules project in June 2020 from Sembcorp Marine’s Batam yard in Indonesia.

Singapore’s state wealth fund Temasek recently stepped in to support a S$2.1Bl rights issue by Sembcorp Marine to help its finances and as it also demerges from its parent company Sembcorp Industries.

Temasek in 2019 had offered to buy control of another Singaporean conglomerate Keppel Corp, whose businesses includes the hard-hit rig-building sector.

Sembcorp Industries owns 61 percent of Sembcorp Marine.

Sembcorp Marine President and Chief Executive Wong Weng Sun said during an earnings call on July 15 that the company had been positioned for recovery in 2020 before being hit by the double crises.

“Given the delays in executing our existing projects, and with new orders likely to remain depressed in 2020, the group now foresees that recovery will be pushed out to 2021 and beyond,” explained Wong.

“While we have yet to announce significant new orders this year, we have resumed discussions on several project opportunities,” added the CEO.

He has also brought in pay cuts across the board in all divisions of the company.

Wong said he had volunteered to take a 50 percent pay cut, senior management will take 15 percent salary reductions and middle management will be paid 10 percent less.

All other employees in Singapore and overseas will take a 5 percent pay cuts, except for those earning under S$1,800 a month. 

Mitsui OSK Lines, with an operating fleet of almost 100 liquefied natural gas carriers, held its annual general meeting at the Shinagawa Intercity Hall in Tokyo on June 23, though few shareholders attended and social-distancing was in place as the company pledged to further develop LNG-powered vessels and bunkering.

Sembcorp Marine of Singapore, ranked among the leading facilities in the world for LNG vessel repairs and upgrades, is the subject of a rights issue of S$2.1 billion ($1.5Bln) to recapitalise the shipyard group.

Sembcorp Marine shipyards in the Asian city state have built a reputation for LNG-powered vessels, bunkering ships and floating LNG storage.

The boards and management teams of Sembcorp Marine and its parent company, Sembcorp Industries, believe that the proposed rights issue and demerger will strengthen the financial positions of both and unlock shareholder value.

“With greater flexibility following the demerger, both companies can pursue their own sustainable growth paths on the back of changes to their industries in recent years,” it added.

Sembcorp Marine proposes to build on its core engineering solutions for the offshore, marine and energy industries.

One of its projects is the 12,000 cubic metres capacity LNG bunkering vessel ordered from Sembcorp’s Tuas Boulevard Yard.

On completion, currently scheduled for early 2021, the dual-fuel bunkering vessel will be chartered to Singapore’s Pavilion Gas for deployment for fueling ships with LNG in the Port of Singapore.

The vessel is the largest of its kind being built locally, in terms of size and LNG tank capacity and is Sembcorp’s first LNG bunker vessel construction project.

Other ongoing upgrades and conversion projects in LNG at Sembcorp’s Admiralty yard include the floating storage and regasification unit (FSRU) “Karmol LNGT Powership Africa” destined for Mozambique and other work.

Parent company Sembcorp Industries will continue to be focused on its core areas of energy and urban development and be poised to capture opportunities in the sustainable energy transition.

“Sembcorp Marine, which has been doubly hit by the Covid-19 pandemic and recent collapse in oil prices, will also be able to better address its urgent need to recapitalise, meet liquidity requirements, and strengthen its balance sheet to ride through the prolonged downturn in the offshore and marine industry,” said the statement.

Both Sembcorp companies will be seeking their respective approval of their shareholders at extraordinary general meetings (EGMs), which are expected to be convened around the of August or early September 2020.

The rights issue is also conditional on Sembcorp Marine shareholders passing a resolution to waive their rights to receive a general offer from Singapore wealth fund Temasek and in connection with the proposed distribution.

Sembcorp Industries has given an undertaking to vote in favour of the rights issue resolution at Sembcorp Marine’s EGM.

The current Sembcorp Marine order book comprises a fairly broad spectrum of product types, including several new-build floating production, storage and offloading vessels, offshore production platforms, as well as battery-operated roll-on, roll-off passenger vessels and LNG bunkering and conversions work.

The Sembcorp construction and conversion work for LNG mainly affects projects involving joint ventures of Japanese shipping company, Mitsui OSK Lines (MOL).

Sembcorp noted in its most recent earnings the Ministry of Manpower in the city state announced movement restriction measures that prevented migrant workers from leaving their dormitories for work.

The workforce of the shipyards normally amounts to 20,000 persons but was substantially reduced to 850 person.

The reduced workforce was deployed to manage critical works and support yard essential services such as emergency response teams, facilities and utilities management and yard security.

Karmol “LNGT Powership Africa” is part of a joint venture involving MOL and the Turkish floating power plant company Karpower International and the vessel is destined for Mozambique.

Sembcorp Marine, the Singapore shipbuilding and repair yard owner, said its business has been substantially affected by Covid-19 slowing work on ships and platforms, including at yards building LNG vessels for bunkering, imports and floating power projects, while the oil price slump has hit orders.

Mitsui Osk Lines, the Japanese shipping company led by President and Chief Executive Junichiro Ikeda and with an operating fleet of almost 100 liquefied natural gas carriers, has set out its future goals after a past year of LNG successes.