Singapore’s Sembcorp Marine has embarked on an in-depth strategic review having on Tuesday completed the S$4.5 billion (US$3.34 billion) acquisition of compatriot and long-time rival Keppel Offshore & Marine, with results of the exercise expected in six to nine months.
While not being drawn on forward-looking issues and how much money the company was hoping to save via synergies, Sembmarine’s newly appointed chief executive and most recent Keppel O&M head honcho, Chris Ong, said that a key focus would be Sembmarine’s plans to return to profitability as soon as possible.
Sembmarine had narrowed its net loss in the second half of 2022, which the contractor attributed to completion of key projects.
In the six months to 31 December, its net loss was S$118.3 million versus a S$523.3 million net loss in the comparable period of 2021 although revenues were down to S$852.2 million from S$1.02 billion.
“It’s a bottoms-up strategic review… that must be attainable and that does not destroy value,” Ong told a webcast on Wednesday evening.
There was a “compelling, clear, commercial” logic behind the acquisition, noted Sembmarine’s just-installed chairman of the board and Shell veteran, Mark Gainsborough.
“[Also], the board will look at the strong delivery of its existing workload,” Gainsborough added.
The self-styled combined entity has a current net order book worth S$18 billion of around 40 ongoing projects including oil, gas, LNG, renewables and low-carbon energy projects.
Headcount and yard facilities to be reviewed
The duo would not comment on specifics regarding a potential reduction in headcount following the tie-up — the combined workforce now stands at about 23,000 — despite Sembmarine officials earlier saying that job losses could not be ruled out.
“Every employee is crucial” to the success of the enlarged Sembmarine, Ong said.
“Most employees will remain in their roles.”
It is understood that any layoffs would be structured, phased and actioned alongside regular communication with workers.
As Sembmarine acquired Keppel O&M from its parent Keppel Corporation — rather than a merger of the two companies — the enlarged entity will be able to seamlessly continue employing those foreign workers which until two days ago were employed by Keppel O&M. However, Sembmarine will have to monitor the diversity of its workforce going forward as the number of foreign workers that it can legally employ depends on how many local (Singaporean) and permanent residents are on its books.
In addition to the two companies’ respective multiple yard facilities in Singapore, the enlarged entity now has yard facilities in eight other nations — the UK, the US, Brazil, Norway, China, Japan, the Philippines and Indonesia.
“The combined entity will be able to immediately realise economies of scale and be strategically positioned to seize opportunities in the improving industry landscape,” Sembmarine said, adding it would leverage its global footprint and customer relationships to secure more orders.
While Ong confirmed that the strategic review will also look at the “geographic footprint” of its overseas yard facilities, Ong told Upstream that it would be “putting the cart ahead of the horse” to determine whether any such assets will be divested.
“With local content [issues], our overseas yards could be very important in future,” Gainsborough added.
Cleaner offshore and marine solutions
One key focus of Sembmarine is on cleaner offshore and marine solutions including floating production units and other structures. While Keppel O&M had made a corporate decision not to take on any more rig-building jobs after some former clients delayed or cancelled their orders during construction, Sembmarine has not ruled out bidding for such work, although it wants to avoid having any stranded assets in future, Ong said.
The enlarged company has a stated aim to scale its footprint in the offshore wind energy value chain including substations and wind turbine installation vessels. It also intends to have targeted investments to develop new energy solutions including carbon capture technology, hydrogen and ammonia with “the eventual aim of building successful franchises in these areas for the decades ahead”.
Sembmarine is already looking at how it can reduce its own Scope 1, 2 and 3 emissions — the latter by working closely with its customers, Ong told Upstream, adding that such initiatives include the digitalisation and optimisation of its yard operations and reducing energy use.
Both its existing Singapore facilities and those acquired from Keppel O&M in the city state can avail themselves of rooftop solar, while there is “significant potential” to use renewable energy at its overseas yards, including hydropower in Brazil, he added.
While the results of the strategic review are expected well before the end of the year —“I’d be disappointed if it took too long,” Gainsborough said — Sembmarine’s new name is set to be unveiled sooner, amid much fanfare and hype, but neither he nor Ong would give any clue as to what options were under consideration.
A Sembmarine official earlier told Upstream that “Singapore” could feature in a new name for the enlarged entity.