RI sand ruling set back SembCorp Industries unit
RI sand ruling set back SembCorp Industries unit
Dow Jones, Singapore
A suspension of a key supply contract from Indonesia will
likely result in SembCorp Industries Ltd.'s engineering and
construction unit missing earnings growth targets, a top
executive told Dow Jones Newswires Monday.
Unit Chief Executive Paul Chain's remarks are in sharp
contrast to the rosy picture SembCorp Industries had painted for
the unit earlier this year, and should disappoint many analysts
who had expected Southeast Asia's largest civil engineering
company to enjoy a bumper year in 2002.
The unit, called SembCorp Engineers & Constructors, started
the year with expectations that its net profit should almost
double on-year to around S$10 million (US$5.5 million) in 2002.
However, Chain said the company "may have a bit of problem"
meeting that target after the Indonesian government recently
suspended sand supply for the company's S$200 million sea
reclamation contract awarded by the Singapore government.
The reclamation project, which commenced last year, has been
put on hold during the past two to three months after the
Indonesian government stopped the supply to review its sand
export policies.
"This year would be the mature year for the project and we are
expecting it to turn in a substantial profit. But if that
substantial profit is going to turn into a loss, that's going to
have some impact on us," Chain said.
"The Indonesians stopped the sand supply. We will incur costs
in terms of the overheads...We do see there's a downside
possibility," he said.
Chain said the halt to the Indonesian sand supply "may drag on
for a while." "At the same time, we don't know how the
(Singapore) government is going to react to it.
"At this point, I don't think we will go into the red. But
also, it's not likely that we will make the S$10 million either,"
he said.
When asked whether the 2002 earnings will at least surpass the
S$5.6 million recorded last year, Chain said "we don't want to
make that commitment."