Sembcorp Industries Limited (SGX: U96), or SCI, is the latest blue-chip stock to announce an impressive set of results.
The utility giant saw its net profit more than triple year on year and has declared a special dividend, similar to the likes of DBS Group (SGX: D05) and City Developments Limited (SGX: C09).
SCI’s performance can be attributed to management’s consistent focus on bulking up its renewables portfolio while securing deals to boost the group’s recurring income.
These efforts have translated into a 45% surge in SCI’s share price over the past year.
Here are five highlights from the group’s 2022 earnings that investors may want to take note of.
1. A sterling set of financial numbers
Total revenue for SCI rose 21% year on year to S$9.4 billion as higher power prices and contributions from renewable energy assets kicked in.
Net profit for the group shot up more than threefold year on year from S$279 million to S$848 million.
However, these profit numbers included exceptional losses of S$35 million and S$193 million for 2022 and 2021, respectively.
Excluding these items, net profit would have surged by 87% year on year to S$883 million.
The utility giant generated a healthy positive free cash flow of S$1 billion for 2022, 11.6% higher than the S$929 million churned out a year ago.
2. Solid renewables and conventional energy performance
Of SCI’s three divisions, both Conventional Energy and Renewables performed well while Integrated Urban Solutions saw a slight revenue dip.
For the Renewables division, net profit before exceptional items surged almost 136% year on year to S$132 million, driven by acquisitions in China along with higher power prices for solar power.
The Conventional Energy division also performed very well, with net profit before exceptional items shooting up more than four-fold year on year to S$747 million from S$147 million.
This strong result was because of higher power prices in both Singapore and the UK.
Integrated Urban Solutions, however, saw a minor 9.7% year on year dip in net profit before exceptional items from S$155 million to S$140 million.
The division recorded lower land and property sales in China but this weakness was mitigated by better sales margins in Indonesia and higher demand in Vietnam.
3. Advancing its “brown to green” plan
More than 18 months ago, SCI laid out its plan to turn its portfolio from brown to green during its Investor Day.
The group’s target is to derive 70% of its net profit from sustainable solutions by 2025.
Currently, that ratio stands at just 27%, but SCI is making good progress on many fronts.
Its gross renewables capacity ended at 8.3 gigawatts (GW) as of 31 December 2022, with another 1.5 GW to be added pending the completion of acquisitions.
When completed, its gross renewables capacity will hit 9.8 GW, just a tad shy of its 10 GW target.
SCI is also targeting up to 500 hectares of land sales by 2025, and that number is currently less than half of this goal at 172 hectares.
4. Good progress on business development plans
The utility group has made good progress with multiple business developments within the past year.
Its Renewables division completed a UK 50MWh battery portfolio back in July and announced acquisitions in both China and India.
Just this week, SCI also signed a long-term power purchase agreement with a wholly-owned subsidiary of Micron Technology (NASDAQ: MU).
This 18-year agreement will be positive for earnings this year.
For Urban Solutions, SCI has secured investment licences to develop four industrial parks in Vietnam.
And under Conventional Energy, the group signed a supply agreement with TotalEnergies SE (EPA: TTE) to import liquified natural gas for five years starting in 2025.
5. 2022’s total dividend has more than doubled
In tandem with the strong results, SCI has also jacked up its dividend for 2022.
A final dividend of S$0.04 and a special dividend of S$0.04 were declared, bringing the full-year dividend to S$0.12 for last year.
This level of dividends is more than doubled the S$0.05 that was paid out in 2021 and shows management’s commitment to rewarding shareholders.
At S$0.12 per share, shares of SCI provide a trailing dividend yield of 3.3%.
If the special dividend was excluded, the trailing yield falls to 2.2%.
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Disclosure: Royston Yang owns shares of DBS Group.
