Sembcorp Marine’s shipyard facility in Brazil is being investigated for “alleged irregularities”, the company confirmed in a regulatory filing.
The Office of the Comptroller General of Brazil has reportedly published a notice in the official gazette saying it had “initiated a preliminary administrative liability proceeding” against Estaleiro Jurong Aracruz Ltda (EJA).
The notice did not provide further details, and Sembcorp Marine said it was unable to assess the matter or impact, if any. It added that EJA was “cooperating fully with the authorities”.
“The company will continue to monitor developments in Brazil with respect to the above and will make appropriate announcements in the event of any material developments,” the yard group said.
“We think the resurgence of negative news flow on any form of investigation by Brazilian authorities could weigh down Sembcorp Marine’s share price in the near term until further clarity is provided,” said CGS-CIMB analysts Lim Siew Khee and Izabella Tan.
However, the brokerage reiterated its “add” call on Sembcorp Marine with an unchanged target share price of SGD 0.12 ($0.09).
The CGS-CIMB analysts estimate that as at end of 2022, Petrobras orders accounted for around 67% of the orderbook for the enlarged entity of Sembcorp Marine and Keppel Offshore & Marine.
News of the investigation sent Sembcorp Marine’s shares down 8% by the end of trading on the Singapore Exchange on Friday.
The shares were the second most heavily traded by value on Friday and the most heavily traded by volume with almost 770m shares changing hands.
This is not the first time EJA has been investigated by Brazilian authorities.
In 2020 the company's then-president, Martin Cheah Kok Choon, was charged in Brazil with money laundering and graft in connection to orders for drilling rigs placed in 2012.
News of the latest alleged wrongdoing comes as Sembcorp Marine launches a strategic review – expected to take six-to-nine months – following its merger with Keppel Offshore & Marine.
New chairman Mark Gainsborough and chief executive Chris Ong have said they will focus on shaping corporate culture; continuous delivery of existing order book to generate cashflow; as well as project safety to instil confidence in customers.
