Singapore's Sembcorp Marine warned investors this week that its first-half 2021 financial results will be hit by ongoing costs related to manpower shortages and project delays.
The contractor has seen its wage costs escalate as it battles to secure workers amid the coronavirus pandemic.
The company said it will make provisions in its first-half 2021 results for significant additional manpower and project delay-related costs to be incurred over the next six to 18 months.
This will translate to half-year losses likely “in the region” of the S$583 million (US$431 million) that it posted for the full year 2020.
“Since the onset of the Covid-19 pandemic in the first quarter last year, the majority of our projects have been delayed by at least 12 months,” Sembmarine acknowledged.
“We have been actively recruiting additional skilled labour from non-traditional sources in order to complete our projects with minimum further delays. On average, recruitment from non-traditional sources costs more than twice that from our traditional sources, due to higher wages and costly upfront Covid-19 related recruitment costs (such as up to five weeks of quarantine in [workers’] home country and Singapore)," the contractor stated.
It also expects to incur additional costs due to work rescheduling, extra sub-contract work, additional materials usage and other staff turnover-related costs.
Bracing the market
Sembmarine on Monday braced the market ahead of its first-half 2021 results that are scheduled to be released on 29 July.
The contractor in early May issued an interim business update for the first quarter of 2021, guiding that such losses would continue throughout the financial year.
Sembmarine on 8 June then gave guidance that its operations continued to be impacted by the ongoing Covid-19 disruptions, and that it was likely to incur increased manpower costs to address the skilled manpower shortage it experienced arising from the pandemic.
Later last month, the company issued further guidance stating that labour shortages and supply chain constraints had resulted in further delays in the completion of its projects.
Besides increased manpower and other related costs, revenues have also been significantly impacted, adversely affecting Sembmarine’s 2021 financial performance.
Finalising financial results
The company is currently finalising its financial results for the six months ended 30 June.
Based on the latest information available, Sembmarine said it now has more visibility on the likely cost increases to complete its ongoing projects in this financial year and next and will be making full provisions for these increased costs in the first-half 2021 financial results.
“As the group finalises its unaudited consolidated financial results for the first half of 2021 and concurrently prepares for its S$1.5 billion (US$1.11 billion) rights issue announced on 24 June, shareholders and investors are advised to exercise caution when dealing in the shares of the company,” cautioned Sembmarine.
Lowering its carbon footprint
The offshore and marine contractor late last month signed a partnership agreement with Singapore's SP Group to enhance the sustainability credentials of Sembmarine’s flagship Tuas Boulevard Yard.
To lower the company's carbon footprint, SP will be commissioned to deploy four megawatt peak (MWp) of solar energy across seven rooftops at TBY. The additional rooftop solar installation will boost the Singapore yard's solar power capacity to 8.5 MWp, able deliver up to 10.6 gigawatt hours of electricity annually.
The integrated energy solution is expected to effectively provide almost 60% of the electricity consumed by TBY’s steel fabrication facility at peak load and avoid annual carbon emissions by more than 4200 tonnes.
“Sembcorp Marine recognises that it can and must contribute to global decarbonisation and sustainable development," said the company's chief executive Wong Weng Sun.
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