The embattled Singapore fabricator Sembcorp Marine has issued an update on its ongoing battle with Covid-19-related issues affecting its performance, with further material cost overruns projected for the second half of 2021.
Since the company's last market update on 19 October 2021 when it warned of significant upcoming financial losses in the second half, the company has made "some progress in managing the delays in project completions" but Covid-19 measures, in particular an "acute manpower shortage", are still having a serious impact on performance.
The company listed five main obstacles for project execution:
- delays in the delivery of equipment arising from border controls in certain countries;
- purchase of new components requiring a longer lead time due to supply chain constraints;
- slower than expected recruitment of additional skilled labour;
- continuing attrition of skilled workers; and
- work disruptions, including stop work orders, resulting from measures taken to address the recent Covid-19 spikes.
Of the 16 projects under execution, five have been further delayed by between one and three months.
The company is therefore likely to incur further material cost overruns and is in negotiations with its counterparties and taking other measures to mitigate these cost overruns.
The projected financial loss in the second half could be similar to the first half loss of SS$647 million.
"As the Group continues to put in place building blocks, including ongoing strategic diversification and expansion into the clean energy sector for sustainable growth, it seeks the support and patience of all its stakeholders to ride through these very trying times," the company said.
Looking ahead, despite the current challenging circumstances, the company expects "significant growth in renewables and other clean energy segments over the next decade and beyond".
In addition, the company is building on its offshore and marine engineering capabilities as it seeks "to move up the value chain and provide a wider suite of products and solutions for its existing business segments".
It's not all bad
Despite all its operational challenges, the company has successfully delivered two wellhead and one riser topsides and two bridges for TotalEnergies’ Tyra East redevelopment in the Danish North Sea; and an offshore substation and reactive compensation station for Orsted Wind Power's Hornsea 2 Offshore Wind Farm.
The company also successfully completed at its Tuas Boulevard Yard the load-out and tandem lift of Shell's Vito mega-topside structure onto the hull of the floating production unit using a pair of Goliath cranes.
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