SembCorp Industries

CFO Lim Joke Mui discusses the group''s borrowing strategy.

Are you satisfied with your third quarter results?

Yes, we’re happy with our results for the 3Q 2003 and for the Year-to-date results for the nine months. This is because our growth has come from the strong operating performance of our core businesses, especially utilities, logistics and environmental engineering.  Also, we managed to divest some of our more difficult non-core assets such as Cathay International Water and our loss-making building materials group of companies and realise a net gain of nearly S$93m.

Stripping out the exceptional items, your quarter-on-quarter numbers are slightly down.

What strategies do you have to improve growth in your core business lines?

We need to clarify the classification of the EI in the 3Q 03 and 3Q 02 results. In 3Q03 - the EI of $25.9m is basically the divestment gains. In 3Q02 - the EI loss of $24.2m is basically the foreseeable losses booked in for our E&C SBU. Therefore, if we were to look at the performance of SCI group excluding the divestment gains for the 3Q03 verses 3Q02, the quarter-over-quarter growth is 68.7% (3Q03 = $49.6m; 3Q02 = $29.4m)

What role will divestments have for the future growth of the company?

We have substantially divested our non-core investments.  Key businesses now account for 96% of SembCorp Industries group total turnover. As such, divestments will not feature that significantly in our results, going forward. We will be driving our growth by focusing on growing our key businesses, both organically and via acquisitions in growth markets.

Does SembCorp Industries have the right mix of business lines now?

As mentioned earlier, our key businesses now account for 96% of total turnover. We now have strong key businesses such as utilities, logistics & marine and a small but growing environmental engineering company.

Your results show that you have a debt/equity mix of 0.88x.  Is there room for the company to take more debt onto its balance sheet in its efforts to create more growth?

Our net debt/equity ratio is actually 0.69 including project finance and 0.41 (excl PF). These ratios are healthy and we can take on additional debt, if we need to. However, we want to continue to maintain a prudent balance sheet and we will invest or incur capex only if the investment make financial sense and meet our targets. We will, first of all, take into account our operating cash flows for our capex before we consider incurring more debt.

  Do you have any plans to visit the local or international bond markets in the near future and are you looking at getting a rating? 

We do not have any immediate plans to visit the local or external bond markets in the near future. We still have available bank facilities and our S$2.0 billion MTN programme to tap.

There have been reports that you are looking at securitizing some of your utility assets.  Can you elaborate on these plans?

Securitising our utility assets is something that we will continue to look at. To date, all of the securitization exercises in Singapore are for properties or receivables, none for utility assets.  As such, there will be many issues, including regulatory issues to be dealt with. However, the most important point that we have to satisfy ourselves is the economics of such a transaction to SCI.  We need to ensure that the funds raised via the securitization exercise can be redeployed into growth assets that can yield us better returns than the assets that we securitise. As with properties, there will come a time when it is makes economic sense and is desirable for us to securitize our utility assets. We will certainly do so then.

Are there any plans to revisit the idea of merging with Keppel, now that business is looking better?

There are presently no plans to revisit the idea of a merger with Keppel.





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