Sembcorp Marine shareholders have queried several proposals tabled by Singapore’s leading offshore and marine contractor ahead of this morning’s crucial annual general meeting.

One of the more probing questions asked why it is proposed that director fees would increase from S$2.25 million to S$2.35 million (US$1.68 million to US$1.76 million) “when the company made a loss of more than S$250 million last year and has been losing money for many years and counting?”.

“Shareholders have not been paid dividends for years, so please justify and account for the increase in director fees being put forth for the coming AGM,” asked the shareholder.

Sembmarine in response noted that the company has gone through a severe and prolonged downturn, with Covid-19 “accentuating the difficulties”.

“This impacted all companies within the offshore and marine industry. The company’s losses were incurred as a result of delayed project deliveries and the much higher costs of labour resulting from the restrictions and lack of resources during the pandemic,” said the contractor.

Sembmarine said that is directors “had expended considerable efforts and provided leadership and guidance” to help it navigate these significant challenges.

“As a result, losses have been significantly reduced in the 2022 financial year compared with those in FY2020 and FY2021.”

Sembmarine added that following its acquisition of compatriot and former rival Keppel & Offshore Marine, the scale and complexity of the business have increased significantly and that its proposed directors’ fees had been benchmarked in this regard.

Post-combination progress queried

Sembmarine was also called upon to provide an update on the latest progress of integrating Keppel O&M into the company.

“How many overlapping roles/staff were identified, retrenched or redeployed?” asked one shareholder.

“How are the resources, especially manpower, optimised between business units and/or projects? Is there an estimate of how much combined expenses can be saved? Please detail and elaborate.”

Sembmarine pointed out that it has been less than two months since the legal completion of the combination.

“[However, good progress has been made on integrating the key management of the two entities”, which would “ensure the smooth execution” of the group’s current order book of more than S$20 billion.

“The process of identification, assessment and achievement of synergies are [sic] ongoing. They include plans to optimise resources, enhance cost efficiencies and maximise the extraction of synergies, with the aim of sharpening our competencies and capabilities to differentiate from the competition.”

An upbeat Sembmarine added it believes that following the merger, it has the necessary resources to execute and deliver all projects in its growing order book. “Manpower, financial and other resources are strategically deployed in alignment with our operational requirements to ensure timely delivery of all projects in our order book,” the contractor said.

To date, there has been no cancellation of any of Sembmarine’s existing orders and the company added it expects these to be profitable.

Against this backdrop, the contractor said it has suspended non-essential capital expenditure, with the exception of maintenance capex to ensure yard safety and operability.

“Going forward, we will focus on increasing our order book and revenue to improve our operating leverage, while concurrently identifying revenue and cost synergies following the completion of the combination.

“These measures are expected to improve operating margins and generate sustainable returns for shareholders.”

Sembmarine is due to hold its 60th AGM on Wednesday at 11am local time, when shareholders will also get the opportunity to vote on the company’s proposed name change to Seatrium.

Sembmarine admitted in response to a shareholder question that it had engaged an external consultant regarding its proposed name change but declined to state which third party company it had employed and how much the consultant was paid.

The contractor appears to be optimistic of getting the green light for the name change, with the company set to strike the gong at the Singapore Stock Exchange (SGX) at 08.30am on Thursday as part of its brand launch.

Sembmarine’s 60th AGM will be held virtually, despite at least one shareholder querying the decision.

“A physical AGM is not considered feasible as the current number of Sembcorp Marine shareholders exceeds 75,000. This makes it impossible to accurately estimate the likely attendance in person and to secure a large enough venue for a physical AGM,” the company explained.

“Further, in light of the spike in infections in recent weeks, a large physical turnout raises the risk of a Covid-19 event, especially since many of our shareholders are seniors.”

Sembmarine added it anticipates that in 2024 it will move to a hybrid format that would allow for both face-to-face and online participation at this AGM.