The difficult global economic situation is having a significant impact on one of Singapore’s leading shiprepair and conversion businesses, operated by the Sembawang group. In its recently released half year results, the company reported an increase in the number of vessels entering its yards for repair and upgrade work. The 258 ships handled in the first six months of the year represented a 10% increase compared with the 235 ships that were docked in the same period in 2015. However, the average value of each vessel docking was down 16%, at S$0.95 million (US$0.68 million), from S$1.13 million (US$0.81 million) the year before.
As a result, the total revenue generated by the division was down by 8% at S$245 (US$176.3) million for the half year, from S$266 million (US$191.4 million) in the equivalent period of the year before.
One of the most notable projects completed by Sembawang Shipyard in the first half of 2016 was the repair and life extension of a VLCC, and its conversion to a FPSO, Prof. John Evans Atta Mills, for Modec. The vessel is now operating for Tullow Oil off the coast of Ghana.
Overall, Sembawang group revenue was S$1.8 billion (US$1.3 billion) in the first half of 2016 compared with S$2.5 billion (US$1.8 billion) in the first half 2015, with net profits falling to S$66 million (US$47.5 million), compared with S$215 million (US$155 million) in the first half of 2015. Other sectors have been adversely affected by global trends more than shiprepair and conversion, however, and as a result its share of total group turnover increased from 11% to 13%.
Speaking at the recent announcement of the half year results, Wong Weng Sun, president and chief executive of Sembawang group, said: “Our repairs and upgrade segment continues to perform creditably, completing repairs and upgrade works for a steady stream of vessels.” He also pointed out that in May this year, Sembcorp Marine’s wholly-owned Brazilian subsidiary Estaleiro Jurong Aracruz (EJA) reached a key operational milestone with the successful completion of the yard’s first vessel repair project.
Sun said that the opening of the New Tuas Boulevard yard with its automated steel fabrication facilities had opened up new possibilities for the group in terms of construction, conversion and major repairs. However he said: “Going forward, we will only proceed with yard capital expenditure needed for the execution of secured contracts, while deferring non-essential capital expenditure.” As a result, total investment in the 2016 financial year is expected to be half that of the preceding 12 months.
Sun added: “Sembcorp Marine’s strategic investments in infrastructure and technology over the years have enhanced our resilience to navigate through these tough times. We have gone through several down-cycles in the past and have built up a strong core that will enable us to weather the elements during this difficult period.”
Recently, Sembawang announced that it is buying the remaining 15% shareholding in PPL Shipyard of Singapore that it did not already own. PPL is in the business of designing, constructing, repairing and enhancing oil rigs, ships and other ocean-going vessels. Following the acquisition, it becomes a wholly-owned subsidiary of the company. In recent months, the group has also purchased two other businesses, Kanfa Aragon and LMG Marin. LMG is a naval architecture as well as ship design and engineering house headquartered in Bergen, Norway, with offices in Poland and France.