Seatrium could post a full-year loss of nearly $500m due to asset write-downs and higher costs on legacy contracts, says an analyst.
The Singapore offshore and renewables yard group said earlier this week that it would report a financial loss that was “significantly higher” than the previous year but gave no figures.
This follows the completion of a strategic review of its operations, in which Seatrium — formed by last year’s merger of Sembcorp Marine and Keppel Offshore & Marine — has said it plans to write down surplus non-core assets and inventories.
It expects these actions to improve its productivity, optimise its cost structure and reduce cash operating expenses, resulting in “significant value creation in the medium to long term”.
CGS-CIMB analyst Lim Siew Khee said she now expects the Singapore-listed company to post a full-year loss of SGD 655m ($490m), up from her earlier estimate of SGD 251m.
“We are not surprised by the guidance issued and see the communication of potential savings from this exercise (if significant) to be a key catalyst,” she said.
Lim expects SGD 250m of write-downs for the second half of the year covering the potential closure of fully depreciated yards such as those at Crescent, Benoi and Tuas, as well as cost overrun provisions.
“We understand that projects clinched post-merger, as well as Petrobras projects awarded pre-merger, were contracted on double-digit gross margins,” she said.
“However, contracts secured by Seatrium and Keppel Offshore & Marine pre-Covid may still face tail-end challenges, including higher labour and supply chain costs not previously factored in, resulting in gross losses.”
Seatrium said it expects to release its full-year results on 26 February before trading hours. Shares in the company are down nearly 30% in the past six months.
Seatrium also announced that it had secured a favoured customer contract with George Economou-backed TMS Cardiff Gas to repair and upgrade its LNG carriers.
The contract includes the refit of 17 vessels in Singapore, with responsibilities in joint planning, information and experience sharing.
TMS Cardiff Gas deputy chief operating officer Alexandros Politis-Kalenteris said the selection of Seatrium as its partner in Singapore aligned with its strategy to grow its LNG business in Asia.
“We have worked successfully with Seatrium on three LNG refits, and we see Seatrium as the right long-term partner who understands the stringent requirements of our company,” he said.
“Moreover, Seatrium boosts a very strong track record in the specialised field of LNG carrier repairs and upgrades. We are confident that this newly forged partnership will benefit both organisations in the planning and execution of our dry-docking work in a safe, timely and cost-effective way.”
