As the world’s economies slowly recover, many blue-chip companies have been reporting better earnings.
Last month, oil and gas conglomerate Keppel Corporation Limited (SGX: BN4) reported its highest profit in six years.
And earlier this month, Singapore’s largest bank, DBS Group (SGX: D05), reported a record S$6.8 billion net profit for its fiscal 2021 (FY2021).
Sembcorp Industries Ltd (SGX: U96), or SCI, has now joined this growing list of companies reporting better financial numbers.
The energy and urban solutions provider is also well on its way to achieving the ambitious targets it set on its Investor Day in June last year.
Here are seven highlights from the group’s latest earnings.
1. A surge in net profit
SCI’s FY2021 saw a 43% year on year increase in revenue to S$7.8 billion.
The increase in revenue was broad-based and came from all of SCI’s three core business segments.
Renewables saw a 26% year on year increase in revenue to S$354 million while the group’s conventional energy division (i.e. oil and gas) saw a 46% year on year jump in revenue to S$6.7 billion.
Net profit from continuing operations soared by 78% year on year to S$279 million.
2. Growing its renewables portfolio
SCI’s renewables division did well for FY2021, posting net profit growth of 22% year on year to S$56 million.
Some notable achievements included the completion of a floating solar farm in Singapore and the securing of 210 MW of new contracts in wind power in India.
The group’s gross renewables capacity has increased from 3.2 gigawatts (GW) as of end-2020 to 6.1 GW in 2022 year-to-date.
As a whole, SCI is on track to meet its 10 GW target installed capacity by 2025.
3. Increasing its land bank
Meanwhile, SCI’s integrated urban solutions division performed well.
Net profit excluding exceptional items jumped by 37% year on year to S$155 million and included a full-year contribution from a waste management business in Singapore that SCI acquired last year.
The division also secured a licence to develop a 481-hectare industrial park in Vietnam and has increased its overall land bank to 13,069 hectares from 12,588 hectares.
4. Better prospects for conventional energy
SCI may be gunning to grow its renewables portfolio, but it also did not neglect its conventional energy division.
The division saw net profit before exceptional items climb 52% year on year to S$373 million, driven by higher energy demand in India, Singapore and the UK.
SCI signed a memorandum of understanding to explore the commercialisation of decarbonised hydrogen into Singapore.
This initiative is part of its strategy for pursuing green technologies for decarbonisation.
5. Achieving a higher return on equity
An effective measure of profitability is the return on equity or ROE.
And SCI has not disappointed in this respect.
The group’s ROE before exceptional items has more than doubled from 5.9% to 12.9%.
Of note, SCI’s conventional energy division chalked up the highest ROE of 11.4% among its three main divisions.
6. Tapping on green financing
As the group pivots away from fossil fuels and boosts its renewables portfolio, it has also begun tapping on green financing to augment its borrowings.
It issued its inaugural S$400 million green bond in June last year, as well as a S$675 million sustainability-linked bond in October.
SCI ended 2021 with S$7.4 billion in gross debt and S$6 billion in net debt.
7. Higher dividends
In line with the improved results, SCI declared a final dividend of S$0.03 per share.
Together with the interim dividend of S$0.02 per share paid out last year, the total dividend for FY2021 is S$0.05 per share.
This level of dividends is 25% higher than the S$0.04 that was paid out in FY2020.
Dividend yield stands at 2% for SCI’s shares at the share price of S$2.46.
Get Smart: Making good progress
SCI is making good progress on achieving the goals it set on its Investor Day.
Management should be complimented for turning the business around and also raising the total dividends for FY2021.
Free cash flow also jumped more than five-fold from S$158 million to S$929 million.
Investors have a lot to look forward to in 2022 as SCI gears up for even more growth.
Do you have what it takes to keep 10X stocks in your portfolio? Read our latest report and see if you have the mindset of a profitable growth investor. Click here to download it for free today.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclaimer: Royston Yang owns shares of DBS Group.
