Sembcorp Marine president and chief executive Wong Weng Sun blamed the severe challenges faced by the shipyard group in the wake of Covid-19 for yet another large loss.
Higher wage costs and project deferments caused by labour shortages took a big toll on the shipyard group’s bottom line.
On Thursday, Sembcorp Marine revealed a net loss of SGD 647m ($478m) on revenue of SGD 844m for the first half of its 2021 financial year.
The loss included provisions of SGD 472m that were largely connected to higher provisions of manpower and other related costs to complete most of its existing projects over the next six to 18 months.
“Over the course of 2021, new waves of localised infections continue to surface with new border control measures put in place,” Wong said. "We continued to face supply chains disruption and shortage of skilled manpower.
“This further impacted our yard operations and the scheduled completion of projects. A majority of the group’s projects have been delayed by at least 12 months since the start of the Covid-19 pandemic.”
To mitigate the risk of project cancellations, Wong said Sembcorp Marine had been coordinating with customers to reach “mutually beneficial outcomes of project rescheduling”.
“I am pleased to share that there is no cancellation of any of the group’s existing projects to date,” he said.
However, Wong cautioned that project rescheduling came with deferments in payments, which has led to a significant reduction in revenue receipts in the near term.
Additionally, to complete the existing projects with minimum further delay, Sembcorp Marine has sourced skilled workers from alternative countries from the ones it usually taps for its labour supply.
The active steps taken to address the acute labour shortage have resulted in increased manpower and other related costs amounting to SGD 361m. This includes upfront Covid-19 related recruitment payments, such as up to five weeks of quarantine in home countries and Singapore.
“On average, recruitment from the alternative sources costs more than twice that from the group’s usual sources,” Wong said.
“As a result of a significant reduction in revenue receipts and an increase in costs, the group faces higher negative operating cash flows, which affected its near-term liquidity position.”
Wong said actions have been taken to reduce Sembcorp Marine’s monthly operational cash burn rate.
All non-essential capital expenditure has been deferred, with the company incurring only maintenance spending to ensure yard safety and operability.
“Given the challenging business environment, the group faces increasing challenges in refinancing its existing maturing debt," Wong said. "As such, we expect an increasing need to repay more debt upon their maturity over the next 18 months.”
To meet its cash requirements, Sembcorp Marine has proposed a heavily discounted rights issue in which it plans to issue SGD 1.5bn-worth of new shares in a fundraiser backed by Singapore sovereign wealth fund Temasek Holdings and the city state’s largest bank, DBS.
Despite some shareholder resistance, Sembcorp Marine said it had considered “various financing options” and believed that an equity rights issue was “the most optimal solution".
