Sembcorp Marine records losses for third consecutive year

Sembcorp Marine (SembMarine) has announced that it has recorded losses for three consecutive financial years, triggering concerns about its financial health. In its latest results release, the group reported a reduced loss of S$261.1 million for the FY2022 ended Dec 31, 2022. The company's announcement comes as it moves forward with its recent merger with Keppel Offshore and Marine (Keppel O&M). The merger was undertaken by Sembcorp Marine, acquiring the entire issued and paid-up capital of KOM and then issuing 36,848,072,918 KOM Consideration Shares. The yard group now has a combined order book of SGD 18 billion ($13.4 billion) in value for delivery between 2023 and 2026. The newly merged entity will be helmed by Chris Ong, KOM's CEO, and is expected to benefit from greater synergies from the broader geographical footprint, larger operational scale, and enhanced capabilities of Singapore's two leading O&M companies. SembMarine's announcement of losses for three consecutive years comes at a time when the company has been grappling with a challenging operating environment in the offshore and marine industry. The company has been hit hard by the downturn in the industry, which has been characterized by low oil prices, oversupply of offshore rigs and vessels, and delays in new orders. Despite the losses, SembMarine's latest six-month average daily market capitalization stood at $4.77 billion, which means it still meets the requirements to avoid being placed under the Singapore Exchange's watchlist. Under the rules of the listing manual, Singapore Exchange (SGX) will place issuers under its watchlist if they record pre-tax losses for the three most recently completed consecutive financial years and have an average daily market capitalization of less than S$40 million over the past six months. SembMarine has also announced that it wants to change its name to Seatrium Limited as part of a rebranding exercise that follows its merger with KOM. Singapore's sovereign wealth fund Temasek Holdings is the biggest shareholder of both Sembcorp Marine and Keppel Corp, the former parent companies of the merged yards.

Bribery scandal

In December 2017, KOM pleaded guilty to charges of paying bribes of up to US$55 million "in or about and between 2000 and 2016" to secure a Tension-Leg Platform project from Petrobras and agreed to pay a total criminal penalty of US$422 million. KOM's related entities, including KOM USA, have earned profits of approximately US$159.9 million from the project. In January, it was reported that KOM had paid off $343.57 million reais (approximately US$65 million) of its fines and damages to the Brazilian authorities related to the corrupt payments made by KOM's former agent to public officials and the Workers’ Party in Brazil. Last December, KOM reached a joint resolution and concluded a leniency agreement with the Brazilian Attorney-General's Office and Comptroller General of the Union. This settlement also resolves CGU’s administrative enforcement procedure against KOM and several other KOM entities.