Sembcorp Marine has warned that it expects to make significant provisions for increased costs in its upcoming first-half results due to the ongoing problems caused by Covid-19.
The Singapore-listed company said the majority of the group’s projects have been delayed by at least 12 months since the onset of the virus in early 2020.
It said it has been actively recruiting additional skilled labour from non-traditional sources in order to complete its projects with the minimum of further delays.
But it says that these new recruitment costs are “more than twice” those of workers from its traditional sources, due to higher wages and pricey upfront Covid-19-related recruitment costs such as up to five weeks of quarantine in their home country and Singapore.
Sembcorp Marine said it also expects to incur additional costs due to work re-scheduling, extra sub-contract work, additional material usage and other staff turnover-related costs arising from the delays in project execution.
The company said these provisions will have a material impact on the group’s interim results and were likely to be in the region of the full-year losses incurred for 2020, which were SGD 583m ($431.4m).
Sembcorp Marine, which is currently in the process of discussing a potential merger with Keppel Corp’s offshore arm, is due to release its interim results on 29 July 2021.
It recently announced an SGD 1.5bn heavily discounted rights issue that the company described as “vital” in fortifying its financial position.
Sembcorp Marine said the recapitalisation was needed to strengthen its balance sheet and enhance its liquidity position, resulting from the severe impact of Covid-19.
Singapore sovereign wealth fund Temasek Holdings recently gave an undertaking to subscribe for up to 67% of Sembcorp Marine’s latest rights issue.
Temasek, through subsidiary Startree Investments, has undertaken to subscribe for its full allocation as well as apply for excess rights not taken up by other shareholders.
The sovereign wealth fund became a 42.6% shareholder in Sembcorp Marine after its demerger from Sembcorp Industries and acquired a further 8.2% in the company following its SGD 2.1bn recapitalisation in 2020.
