29 Tanjong Kling Road Singapore 628054 Tel: (65) 6265 1766 Fax: (65) 6261 0738 / 6265 0201 Website: www.sembcorpmarine.com.sg Company Reg. No: 196300098Z
LEVERAGING STRENGTHS BUILDING SYNERGY
Our ownership of propietary designs in container vessels and deepwater jack-up rigs expanded and strengthened our earnings base. Our interest in the Cosco Shipyard Group established our strategic The know-how and experience gained put presence along the entire length us at the forefront of building sophisticated of China's coast for future growth. semi-submersible rigs. China
Brazil
Installation, integration and commissioning in Mauá Jurong.
Completion of marine hull conversion in Singapore. Our home-based shipyards provide complementary facilities and capabilities within the Group. Singapore SembCorp Marine Ltd • Annual Report 2004 SembCorp Marine Shipyards - Strategically located to serve customers worldwide. Cosco (Nantong) Shipyard (China)
Cosco (Shanghai) Shipyard (China) Cosco (Dalian) Shipyard (China)
Cosco (Guangzhou) Shipyard PPL Shipyard (China) (Singapore)
Mauá Jurong Shipyard China (Brazil) Cosco (Zhoushan) Shipyard (China)
SembCorp Marine's businesses Singapore are conducted globally through 11 strategically located shipyards in three strategic hubs of
Singapore, China and Brazil. Jurong SML Shipyard (Singapore) Operating as distinct brand Brazil names, each shipyard focuses Jurong Shipyard on its areas of expertise and (Singapore) market niches and forms part of SembCorp Marine's global hub strategy to provide clients with the most innovative marine engineering solutions and Karimun Sembawang Shipyard (Indonesia) Sembawang Shipyard services worldwide. (Singapore)
CORPORATE PROFILE CORPORATE VISION
SembCorp Marine serves global customers by delivering a full spectrum of We aim to be the world leader in ship repair, ship conversion and offshore engineering, integrated ship repair, shipbuilding, ship conversion, rig building and offshore providing innovative solutions that exceed customers’ expectations. While anchoring engineering solutions. ourselves for future growth and global expansion, we continue to commit ourselves to fulfilling the changing needs and aspirations of our employees. Our 11 strategically located shipyards are centred round three main engineering hubs: Singapore, China and Brazil. Working in synergy, these shipyards have complementary facilities and capabilities allowing them to provide integrated and customised solutions from design and conceptualisation through to commissioning and delivery. CORE VALUES Committed to the highest standards of quality, safety and reliability, SembCorp Marine is the hub of choice for all marine engineering needs. INTEGRITY PEOPLE-CENTREDNESS We believe in and perform our duties with honesty, We respect and value every individual regardless of his dedication and responsibility. We value loyalty, or her position in our organisation. We provide equal trustworthiness, reliability and openness as essential opportunities and a conducive environment for employees personal attributes in our corporate culture. to attain their full potential. We reward all employees fairly, benchmarking their performance to best practices. We HEALTH, SAFETY, SECURITY & believe in building a learning organisation for our people ENVIRONMENTAL PRESERVATION to acquire knowledge and skills to achieve professionalism. We are committed to continuously promote a safe and healthy work environment for our customers, TEAMWORK employees, contractors and the community. We take We are committed to working together and having responsibility for our own safety and of others both on trust in one another to achieve common organisational and off the job. goals and results. We believe in promoting closer relationship and developing team spirit among our people INNOVATIVENESS to encourage speedy and open communication and to We believe that innovation and creativity are crucial to care for each other. stay ahead of the competition and bring about better efficiency in the organisation. We secure industry CUSTOMER SERVICE leadership through constant innovative technological and Our customer is the key to our success. We continue to engineering solutions and encouraging entrepreneurship. provide innovative solutions that add value to our customers and to build lasting relationships with our QUALITY customers based on trust and shared purpose. We constantly and consciously strive to achieve world- class quality standard in everything we do for our COMMUNITY RESPONSIBILITY customers, to improve our quality of life and to add value We view our business as being an integral part of society. for our shareholders. We believe in continuous We are committed to being a responsible corporate improvement and enhancing our competencies to meet citizen, both locally and globally, contributing to community rapid global changes. improvements and creating a caring organisation. SHIPBUILDING Core Expertise RIG BUILDING & Capabilities
SHIP REPAIR
SHIP CONVERSION
OFFSHORE ENGINEERING
Ship Repair Shipbuilding Ship Conversion Rig Building Offshore Engineering • Tankers – ULCC, VLCC • Proprietary design and construction of 1,078 Offshore Conversion Specialised Conversion • Design and construction of jack- • Repair and upgrade of jack-up • Chemical tankers TEU to 2,600 TEU container vessels • Ship-shaped: Tankers to Floating • Tanker to lightering vessel up rigs drilling rigs • Gas carriers – LNG, LPG • 11,500 dwt product/chemical tankers Production Storage Offloading • Cargo vessel to container vessel • Construction of 5th generation • Repair and upgrade of semi- • Container vessels • 37,000 dwt bulk carriers (FPSO) units and Floating Storage • Power barge conversion dynamic positioning submersible rigs for • Bulk carriers • 9,650 dwt cable laying and repair vessels and Offloading (FSO) units • Cargo vessel to livestock carrier semi-submersible rigs deep-water drilling • Dredgers • Tin bucket dredgers • Rig-shaped : Derrick crane semi- • Pipe-laying barge conversion • Construction of workover rigs • Fabrication, installation and • Navy vessels • Ice-breaking tugs submersible to Floating • Jumboisation and dejumboisation commissioning of topside • Passenger vessels • Ocean-going tugs Production Unit (FPU) production modules • Drilling tenders • Multi-purpose cargo vessels • Supply vessels • Ro-ro vessels • Derrick barges • 14,000 dwt Freedom class vessels • 90,000 dwt tankers Letter to
Shareholders LEVERAGING STRENGTHS. BUILDING SYNERGY.
Dear Shareholders payment for 2004 will be 7.5 cents per share. The dividend payout ratio at 90.1 per cent takes into account corporate tax rate of 20 per cent. This will be the highest dividend The year ending December 31, 2004 was a record year payout in SembCorp Marine’s history as testimony to our for SembCorp Marine. We scored a number of firsts in unwavering commitment to distribute value to our our financial performance, dividend payment and contracts shareholders. secured.
Business Review Financial Performance
Ship Repair Net profit for 2004 reached a record high at $95.0 million In 2004, we experienced improved performance from our for the year in review, an increase of 21 per cent from ship repair sector. Revenue for this sector increased by $78.5 million in 2003. Excluding exceptional items, net $110.7 million from $345.5 million in 2003 to $456.2 million several high-value FPSO-upgrading and bottom- profit grew by 26.9 per cent to $98.1 million as compared in 2004, marking a 32.0 per cent year-on-year growth. damaged bulk carrier jobs undertaken during the year. with $77.3 million for 2003. Although the number of vessels repaired was reduced from 341 in 2003 to 313 in 2004, the average value per FSU and FPSO upgrading and tankers accounted for Group turnover was also at its highest at $1,362.8 million, vessel increased from $1.01 million in 2003 to $1.46 46 per cent of ship repair revenue. In 2004, contribution a growth of 27.6 per cent from $1,068.0 million in 2003. million in 2004. This increase was attributed mainly to from bulk carrier repairs registered a significant increase This growth was driven mainly by increased revenue from both the ship conversion and ship repair sectors. The shipbuilding and rig building sectors, however, registered declines as most projects were pending take-up or in the early stages of production in 2004.
Group operating profit registered an increase of 26.3 per cent from $74.3 million in 2003 to $93.9 million in 2004. Group pre-tax profit showed an increase of 19.8 per cent to $114.0 million in 2004, compared with $95.2 million in 2003.
Net asset value per share was 67.9 cents as compared with 65.3 cents per share in 2003. Earnings per share were 6.68 cents, while return on equity was 10.0 per cent.
Record Dividend Payout
In tandem with rising earnings and the record performance for 2004, the Board of Directors is recommending a final gross dividend of 1.0 cents per share and a special dividend of 5.0 cents per share, totalling up to 6.0 cents per share. Together with the interim gross dividend payment of 1.5 cents per share, our total gross dividend
8 9 SembCorp Marine Ltd • Annual Report 2004 Letter to
Shareholders LEVERAGING STRENGTHS. BUILDING SYNERGY.
to 24 per cent, compared with 3 per cent in 2003. The favourable freight rates, delivery schedules coupled with China’s strong demand for goods contributed to this increase. Gas carriers and container vessels accounted for 8 per cent each of total repair followed by others at 6 per cent, Navy vessels contributed 3 per cent, dredgers 3 per cent and cargo vessels 2 per cent.
Shipbuilding Shipbuilding contributed $81.1 million, or 6 per cent, to total revenue in 2004. This was $26.2 million, or 24.4 per cent, lower than that achieved in 2003. The decline was attributed to the lower take-up rate for shipbuilding as most shipbuilding projects that were secured in 2003 and 2004 were still in the early Work-in-progress carried forward from 2004 stages of production. Only one unit of the 2,500 TEU comprised the Erha FPSO project and the FPSO Modec container ship was delivered in the last quarter of 2004 Venture 11 to be delivered in the first quarter of 2005. together with one unit of patrol boat and two units of The US$628 million P-54 EPIC turnkey FPSO 3,200 hp tug boats. Work-in-progress, however, comprised conversion contract that was secured in June 2004 eight units of 2,600 TEU container ships with deliveries will contribute significantly to performances in 2005 Associates’ Contributions equity stake in Cosco Dalian in China. Based on our scheduled from second quarter 2005 to third quarter and 2006. Our strategy to grow our marine and offshore business successful partnership, we subsequently signed an 2007 and two units of 4,950 dwt tankers due for delivery paid off when our associated companies, Cosco (Dalian) agreement with China Ocean Shipping Co. (COSCO) in in the second quarter of 2006. Rigbuilding Shipyard in China and Mauà Jurong in Brazil provided July 2004 to take a 30 per cent stake in the enlarged Revenue contribution from our rigbuilding sector steady and growing contributions of $6.95 million and Cosco Shipyard Group of ship repair yards. These include Ship Conversion and Offshore registered a decline by $17 million from $135 million in $6.06 million before tax respectively in 2004. This Dalian, Nantong, Shanghai, Zhoushan and Guangzhou. Our ship conversion and offshore sector registered 2003 to $118 million in 2004. Only one unit of jack-up compared favourably with $3.02 million and $1.64 million All these yards are strategically located across the entire the highest increased contribution, at 45 per cent rig was delivered in 2004. Another two units of respectively in 2003. length of China’s coast, offering ship owners a network of total revenue or $615 million in 2004. This was $224 semi-submersibles rigs were in advanced stages of of high-quality marine engineering services. million, or 57.3 per cent, higher than in 2003. production with delivery due in the first quarter of 2005. Strategy for Sustained Growth This improvement was due to the major progressive The progressive take-up of the five units of jack-ups that Leveraging Complementary Overseas Facilities completion of the P-50 marine conversion in Singapore were secured in 2004 and early 2005 is expected to Growing our China Hub Our global hub strategy seeks to build a network of and the take-up of the P-50 topside fabrication works in take effect in 2005 and 2006, with deliveries due from the In our efforts to expand our marine business, we first overseas facilities to serve our customers globally. It began the last quarter of 2004 in Brazil. second quarter of 2006 to the second quarter of 2007. joined forces with the Cosco Group in 2001 by taking an in 2001 when we ventured into Brazil with a 35 per cent
10 11 SembCorp Marine Ltd • Annual Report 2004 Letter to
Shareholders LEVERAGING STRENGTHS. BUILDING SYNERGY.
equity stake in Mauà Jurong, a shipyard in Brazil. This Of similar success was our 2,600 TEU proprietary design Outlook for 2005 Mr Wong’s selfless dedication, commitment, vision and strategic hub in Brazil so far has made steady contributions. container ship which saw six units ordered by major leadership over the past five years at the helm has Our presence in Brazil has provided us the use of overseas shipping lines Wan Hai Lines and two units by Reederei In 2004, we secured a total of $2.1 billion worth of new transformed SembCorp Marine into a global company facilities to complement and supplement our Singapore F Laeisz in 2004. In total, eight units of such container contracts with deliveries from 2005 to 2007. This with a network of eleven strategically located shipyards shipyards for the FPSO and FSO offshore conversions vessels are currently undergoing varying stages of was a record high in new contract amount for SembCorp in Singapore, China and Brazil. for the mutual benefits of both parties. production in the shipyard. Marine, as compared with $757 million in 2003. Our order book as at December 31, 2004 for shipbuilding, ship Mr Naoteru Tsuda, a board member representing Developing Proprietary Designs Building Strategic Customer Alliances conversion and rig building remained strong at $2.3 billion Ishikawajima-Harima Heavy Industry Co. (IHI) of Japan To differentiate ourselves and to grow our business, we We continue to grow and capture ship repair market share compared to $1.1 billion as at December 31, 2003. since May 2002 stepped down as a board member in have developed and marketed our proprietary designs in through strategic alliances with customers. We secured This comprised shipbuilding at $487 million, ship 2004. We would like to thank him for his dedicated deepwater jack-up rigs and the 2,600 TEU container a breakthrough long-term ship LNG refit contract with conversion and offshore at $1.21 billion and rig building services and many contributions to the Board. vessels. The continued ownership of proprietary designs North West Shelf, a consortium based in Australia. Quality at $589 million. allows us to expand our earnings base. and faster turnaround time are key considerations for Finally, the Board would like to thank all our valued clients such customers. The long-term strategic alliances with Based on the new contracts secured and the scheduled and business associates for their continuous support. Our launch of the proprietary Baker Marine Pacific Class our customers will provide us with a steady baseload and completion of projects, the Group expects a higher Our appreciation also goes to our employees whose hard 375 deep drilling offshore jack-up rig design since early enable us to improve our systems and cost structures to operating profit for 2005. We also expect higher work, dedication and loyalty have contributed to our 2004 has gained the confidence and acceptance from serve our customers better. We aim to increase our contribution from China in 2005 when our investment in achievements in the past year. Finally, we would like to owners in addition to attracting new building orders. To contributions from such alliances to 50 per cent from the the Cosco Shipyard Group will take effect. thank all our shareholders for their continued interest and date, we have secured five rig-building orders, and we current 29 per cent of total ship repair revenue. support for the SembCorp Marine Group. are expecting more to come. The ship repair market is expected to remain buoyant amidst the competitive environment and favourable freight rates for all categories of vessels. For shipbuilding, there is continual demand for our proprietary 2,600 TEU container ships. Market fundamentals for floating production storage offloading (FPSO) and floating storage offloading (FSO) vessels also remain strong. Due to the global ageing rig fleet, demand for the upgrading and building of rigs is further expected to continue to meet the robust growth in the oil and gas sector.
Against this market scenario, we expect to grow our shipbuilding, ship conversion and offshore businesses Tan Kwi Kin by 15 per cent in 2005. President & CEO
Board and Management March 1, 2005
On behalf of the Board of Directors, I would like to place on record our heartfelt condolences to the wife and family members of the late Chairman, Mr Wong Kok Siew, for the loss of a capable and excellent man who has been very instrumental in steering SembCorp Marine’s overseas growth and expansion through the hub strategy.
12 13 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
Group Financial Highlights
For the year (S$'000) 2004 2003 % Change
Group Profit & Loss Account Turnover 1,362,764 1,067,986 27.60 Profits EBITDA 131,372 109,604 19.86 Operating Profit 93,853 74,308 26.30 Profit Before Tax 114,009 95,186 19.77 Attributable Profit 95,002 78,540 20.96
Group Balance Sheet Total Assets 1,859,365 1,525,115 21.92 Total Liabilities 856,655 583,242 46.88 Net Tangible Assets 959,334 917,298 4.58
Shareholders' Funds 968,900 927,127 4.51 Minority Interests 33,810 14,746 129.28 Capital Employed 1,002,710 941,873 6.46
Cash and Cash Equivalent 469,484 202,786 131.52 Borrowings (149,645) (101,029) 48.12 Net Cash 319,839 101,757 214.32
Financial Ratios Earnings Per Share (EPS) EPS, before tax (cents) 8.02 6.72 19.35 EPS, after tax (cents) 6.68 5.55 20.36
Dividend Per Share Net dividend (cents) 6.00 3.97 51.13 Gross dividend (cents) 7.50 5.00 50.00
Net Assets Value per share (cents) 67.87 65.29 3.95 Net Tangible Assets per share (cents) 67.20 64.60 4.02
Return on Turnover (%) 6.97 7.35 (5.17) Return on Total Assets (%) 5.61 5.21 7.68 Return on Equity (%) 10.02 8.41 19.14
14 15 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
Group Quarterly Results
$'m $'m 2004 (S$’000) 1Q 2Q 3Q 4Q Total 35 35 Turnover 245,005 330,833 389,981 396,945 1,362,764 Operating Profit 18,298 25,558 31,695 18,302 93,853 30 30 EBITDA 27,443 34,470 40,952 28,507 131,372 25 25 28.9 Profit before Tax 22,860 31,959 30,281 28,909 114,009 20 20 24.9 Attributable Profit 21,200 27,096 21,784 24,922 95,002 30.3 15 15 2004 Quarterly Profit Before Tax 2003 Quarterly Profit Before Tax 19.919.5 24.4 and Attributable Profit and Attributable Profit Earnings per share (cents) - Year-to-date 1.49 3.40 4.93 6.68 32.0 21.8 10 10 Earnings per share (cents) - In Quarter 1.49 1.91 1.53 1.75 6.68 27.1 18.9 5 27.2 5
0 21.6 0 2003 (S$’000) 1Q 2Q 3Q 4Q Total
Turnover 195,449 294,356 339,211 238,970 1,067,986 22.9 23.7 4Q 4Q Operating Profit 17,777 22,967 17,809 15,755 74,308 21.2 18.5 EBITDA 25,915 31,336 27,040 25,313 109,604 Profit before Tax 23,725 27,166 24,374 19,921 95,186 3Q 3Q Attributable Profit 18,508 21,610 18,930 19,492 78,540
2Q 2Q Earnings per share (cents) - Year-to-date 1.31 2.84 4.17 5.55 Earnings per share (cents) - In Quarter 1.31 1.53 1.33 1.38 5.55 1Q 1Q
$'m $'m Profit before Tax $'m Profit before Tax $'m Attributable Profit Attributable Profit 400 400 35 35
350 350 30 30 396.9 300 300 25 25 250 250 390.0 20 20 200 200 31.7 15 15 150 339.2 239.0 150 2004 Quarterly Turnover Contributions 2003 Quarterly Turnover Contributions 18.3 100 100 2004 Quarterly Operating Profit 10 2003 Quarterly Operating Profit 15.8 10
330.8 50 50 5 5 17.8 294.4 25.6 0 0 0 23.0 0
4Q 4Q 4Q 4Q 245.0 18.3 195.4 17.8 3Q 3Q 3Q 3Q
2Q 2Q 2Q 2Q
1Q 1Q 1Q 1Q
16 17 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
Financial Calendar Corporate Directory Bankers Bank of America NT & SA Financial Year 2004 Registered Office Citibank Singapore Ltd 29 Tanjong Kling Road, Singapore 628054 DBS Bank Ltd Telephone : (65) 6265 1766 The Hongkong and Shanghai Banking Corporation Limited 2004 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Fax : (65) 6265 0201/(65) 6261 0738 Oversea-Chinese Banking Corporation Limited Financial Year Website : www.sembcorpmarine.com.sg Standard Chartered Bank Announcement of E-mail : [email protected] Results & Dividends Sumitomo Mitsui Banking Corporation Mizuho Corporate Bank Ltd 2003 Full Year Feb 5 Share Registrar Quarter 1, 2004 May 4 United Overseas Bank Limited Kon Choon Kooi Pte Ltd Quarter 2, 2004 Aug 2 47 Hill Street, #06-02 Quarter 3, 2004 Oct 29 Share Listing Chinese Chamber of Commerce & Industry Building 2004 Interim Dividend Aug 31 SembCorp Marine’s shares are listed on the Singapore Payment Singapore 179365 Exchange Securities Trading Limited 2003 Final Dividend May 18 Payment Auditor Delivery of Company Secretary Apr 13 Ernst & Young Annual Report Ms Kwong Sook May Certified Public Accountants Annual General Meeting Apr 28 Singapore Audit Partner: Daniel Soh (Appointed during financial year ended 31 December 2003) Financial Year 2005
2005 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Financial Year Announcement of Results & Dividends 2004 Full Year Feb 7 Quarter 1, 2005 Apr 27 Quarter 2, 2005 Aug 1 Quarter 3, 2005 27 Oct 2004 Final Dividend Payment May 18 Delivery of Annual Report Apr 6 Annual General Meeting/ Extraordinary General Meeting Apr 21
18 19 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
Bulk Trade Corporate Pte Ltd Structure SembCorp (as at March 12, 2005) MarineLtd
Jurong Clavon Pte Ltd 100% JPL
Services Pte Ltd
JPL
Industries Pte Ltd 55% Jurong Machinery 70% & AutomationPte Ltd Jurong Marine Services 53.8% Pte Ltd Jurong Integrated Services 100% Pte Ltd
P.T. Karimun SembawangShipyard (Indonesia) 50% Jurong Jurong Marine Shipyard Pte Ltd ContractorsPte Ltd 100% Cosco Shipyard Group 100% (China)
SembawangShipyard Pte Ltd 100% 100%
Mauá
Jurong(Brazil) SA 30% Jurong SML Pte Ltd 100%
Singapore Shipyard 35% Overseas Shipyard PPL
Shipyard Supporting Companies Pte Ltd 100%
85%
20 21 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
Organisation : Chang King
Structure Supporting Companies
(as at March 12, 2005) Jurong Integrated: [email protected] Services Executive Director Email
Wong Weng Sun Heng Chiang Gnee Board of Directors : Chew Yam Poey President : Tan Kwi Kin Dy President :
Jurong Machinery & Automation: [email protected] Executive Director Email
: Wong Weng Sun : Lee(Offshore) Yeok Hoon : Don Lee : Tan Kwi Kin Shipyards (Singapore) : Yu Ching Ong Jurong Shipyard JPL Services: [email protected] Chairman Director Managing Director (Ship Repair) : Tey Chin Tiong Email Executive Director Senior General: [email protected] Mgr Asst GM Email : Wong Peng Kin [email protected] : K. K. Wee : Ong Poh Kwee : Neo Choon Gee : Wong Lee Lin : Heng Chiang Gnee Jurong Marine: [email protected] Contractors Sembawang Shipyard Executive Director Chairman Email Managing Director Executive Director : Liu Chin Peng Asst General: [email protected] Mgr (Business) Asst Gen Mgr (Operations) Email : Yu Ching Ong Finance & Administration : Freddie Woo : Tan Kwi Kin Wee Sing Guan, Chief Financial Officer Cosco Shipyard Group [email protected] Jurong SML (China) : [email protected] Tan Cheng Tat, Vice President Deputy General Manager Chairman Email Low Siew Lian, Asst General Manager Alternate Chairman: [email protected] Executive Director Email
: Ong Tian Khiam : Tan Kwi : Dr Kin Benety Chang
PPL Shipyard Chairman Staff Support Group Corporate Development Dy Chairman: [email protected] Ng Thiam Poh, Senior Vice President Managing Director [email protected] Human Resource Email Wong Peng Kin, Group Director [email protected] : Chan Nai Eng Kevin Choong, Asst General Manager Koh Guat Siew, Asst General Manager : Wong Yu Liong Mauá Jurong: [email protected] SA (Brazil) Shipyards (Overseas) Director & CEO Email P.T. Karimun Sembawang Investor Relations & , Marketing Shipyard: [email protected] (Indonesia) Communications General Manager Judy Han, Senior Vice President Email [email protected] Marketing Chua Teck Lian Senior Vice President [email protected] Don Lee Fook Kang Senior Vice President, Marketing Ong Tian Khiam Senior Vice President, Marketing Internal Audit Say Chiou Mei, Asst Vice President [email protected]
Engineering Seow Tan Hong, Senior Vice President [email protected]
Legal Tan Yah Sze, Asst Vice President [email protected]
22 23 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
Significant Events • Visit by BG (NS) George Yeo, Minister for Trade and • Participation in Singapore’s 37th National Day Parade Industry, to Mauá Jurong shipyard in Brazil • Sembawang Shipyard signed a long-term Favoured Customer Contract with Tecto Belgium N.V. (TECTO) January July and Franceship, Belgium • Formation of 82 per cent owned subsidiary Kristiansand • Completion of marine hull conversion on FPSO P-50 Drilling by Sembawang Shipyard (S) Pte Ltd and Skeie by Jurong Shipyard for Petrobras Netherlands BV September Group AS Norway’s Deep Drilling 1 as a vehicle for a • Formation of 40 per cent owned joint-venture company, • Launch of the $500,000,000 Multicurrency Multi-Issuer US$110 million rig-building contract Cosco Shipyard Jurong Clavon, by subsidiary Jurong Debt Issuance Programme by SembCorp Marine • Delivery of two high-speed patrol boats, KP Balam Clavon and Cosco Shipyard Group • Participation in MARTECH 2004 at the Singapore Polytechnic and KP Murai, by Jurong SML to the Indonesia • Participation in the Marine and Offshore Industry Promotion Police and Exhibition at the National University of Singapore • Long Service Award presentation to 104 employees • Participation by Jurong Shipyard in SPRING Singapore’s in Jurong Shipyard ‘Singapore Innovation Award Winners Experience October • Donation of $12,300 to 57 needy students residing in Sharing Session’ • Award of long-term LNG refit contract to Sembawang the Marsiling Constituency as part of SembCorp • Participation by Jurong Shipyard in the National Shipyard and Jurong Shipyard by Australia’s North West Marine’s School Book Assistance Grant (SchoolBAG) University of Singapore’s ‘FPSO Research Forum’ Shelf Shipping Scheme • Participation in Choice Engineering @Careers 2004 • Presentation of SHARE Programme Gold Award for year 2004 to Sembawang Shipyard April • Christening and delivery of Jascon 5, a dynamic • Acquisition of 30 per cent equity stake in Cosco February positioning class 3 pipelay, construction and Shipyard Group by SembCorp Marine, subject to • Announcement of full-year 2003 financial results accommodation barge by Sembawang Shipyard to approval from the regulatory authority of the People’s • Presentation of Provisional Statement of Compliance Sea Trucks Group Republic of China of a Port Facility to Jurong SML and Sembawang • Appointment of Mr Wong Weng Sun as Deputy Shipyard May President of SembCorp Marine • Award of US$117.6 million contract for the construction March of one unit of Baker Marine Pacific Class 375 jack-up August • Delivery of GSF Constellation II, one of the world’s rig to PPL Shipyard by Mosbarron Ltd • Announcement of second quarter 2004 financial results • Delivery of Petrobras 43 by Mauá Jurong in Brazil to most advanced jack-up rigs, by PPL Shipyard to • Successful assembly of GlobalSantaFe Development • Presentation of three scholarships under NTU Marine Kellogg Brown and Root Halliburton GlobalSantaFe Corporation Driller II, a fifth-generation dynamic positioning semi- and Offshore Engineering Undergraduate Scholarship • Joint participation by Jurong Shipyard and Mauá Jurong • Signing of long-term Favoured Customer Contract submersible drilling rig, by Jurong Shipyard Programme by Jurong Shipyard and Sembawang in the Rio Oil & Gas Exhibition in Rio de Janeiro in Brazil between Sembawang Shipyard and Taiwan Maritime • Announcement of first quarter 2004 financial results. Shipyard Transport to provide drydocking facilities to the • National Day Observance Ceremony with BG (NS) George company’s diversified fleet of 40 ships June Yeo, Minister of Trade and Industry, as guest-of-honour • Presentation of Merit Award at the 30th Annual Report • Award of US$628 million P-54 FPSO EPC contract by Awards Ceremony for SembCorp Marine’s 2002 Annual Petrobras Netherlands BV to Jurong Shipyard for the Report conversion of a VLCC tanker to a floating production • Presentation of Provisional Statement of Compliance storage offloading (FPSO) platform of a Port Facility to Jurong Shipyard • Presentation of $23,450 in Bursary Awards to 31 • Participation in Asia Pacific Maritime Exhibition 2004 students by Sembawang Shipyard held at the Singapore Expo • Participation in Posidonia 2004 ‘The Heart of Shipping’ • Naming ceremony of GlobalSantaFe Development Exhibition in Piraeus, Greece Driller I at Jurong Shipyard
24 25 SembCorp Marine Ltd • Annual Report 2004 At A
Glance LEVERAGING STRENGTHS. BUILDING SYNERGY.
• Presentation of National Infocomm Award 2004 to Awards & Accolades NTUC May Day 2004 Sembawang Shipyard for the Most Innovative Use of Gold Award: Jurong Shipyard Infocomm Technologies (Private Sector) by Infocomm Presented by National Trades Union Congress to Singapore H.E.A.L.T.H. Awards 2004 Development Authority of Singapore companies for their continuing commitment towards good Gold Award: Jurong Shipyard union-management relations, employee welfare, training Silver Awards: Sembawang Shipyard and Jurong and development. SML Presented by Health Promotion Board to companies with effective and comprehensive initiatives in place to promote • Naming ceremony of GlobalSantaFe Development employees’ health and wellness. Driller II at Jurong Shipyard • Christening ceremony for FPSO Modec Venture 11 at Jurong Shipyard • Award of $143 million shipbuilding contract to Jurong Shipyard for the construction of two units 2,646 TEU container vessels for Wan Hai Lines • Award of US$32 million shipbuilding contract to Jurong SML by Kuwait Oil Tanker Company S.A.K. for the International Ship and Port Facility Security construction of two units of 4,950 dwt tankers November Provisional Statement of Certification : Jurong • Award of US$131 million rig building contract to Jurong • Award of US$84 million shipbuilding contract to Jurong Shipyard, Sembawang Shipyard and Jurong SML Shipyard by Petrojack AS of Norway Shipyard to construct two units of 2,600 TEU container Awarded by Maritime Port Authority to shipyards with • Approval of business licence by the People’s Republic National Infocomm Award: Sembawang Shipyard vessels for Reederei F Laiesz comprehensive security measures in line with IMO’s of China’s regulatory authority for SembCorp Marine’s Presented by Infocomm Development Authority of • Approval by the regulatory authority of the People’s international code for the security of ship and port facilities 30 per cent stake in the registered capital of Cosco Singapore for the Most Innovative Use of Infocomm Republic of China for SembCorp Marine’s 30 per cent Shipyard Group Technologies (Private Sector) acquisition of Cosco Shipyard Group Partner in Organisation Excellence Award 2004: • Contribution of $152,350 to needy students under Jurong Shipyard • Presentation ceremony for Green Wave Environmental 30th Annual Report Awards 2003 SembCorp Marine’s School Book Assistance Grant Presented by SPRING Singapore to companies that made Care Competition Awards with Mr Tharman Merit Award: SembCorp Marine Scheme significant contributions towards organisation and Shanmugaratnam, Minister of Education, as guest-of- Presented by Institute of Public Accountants of Singapore, innovation excellence honour Securities Investors Association, Institute of Management, • Christening ceremony for FPSO Baobab Ivoirien MV10 Singapore Institute of Directors, Singapore Exchange and IDEA Awards : Jurong Shipyard (5), Sembawang at Jurong Shipyard Business Times to listed companies whose annual reports Shipyard (2) • Announcement of third-quarter 2004 financial results have achieved a high standard of excellence and disclosure Presented by SembCorp Industries to individuals or groups beyond the minimum regulatory requirements. December within the SembCorp Industries Group who had successfully implemented creative and innovative ideas at work • Christening and delivery of Theodor Storm, a 2,500 Annual Safety Performance Awards Ceremony 2004 TEU container vessel, by Jurong Shipyard to Reederei Silver Awards: Jurong Shipyard (3) and Sembawang Community Chest of Singapore Awards Karl Schlüter Shipyard (1) Corporate Bronze Award: Sembawang Shipyard • Blessing ceremony for FPSO Sendje Berge by Jurong Merit Awards: Jurong Shipyard (5) and Sembawang 5-Year Outstanding Share Award: Sembawang Shipyard Shipyard • Donation of $306,530.40 by employees and Shipyard (10) Bronze Award presented for $50,000 fund-raising activities, • Christening and delivery of PW Tekun and PW Tegap, subcontractors of SembCorp Marine Group to the Red Awarded by the Ministry of Manpower (Occupational Safety while 5-Year Outstanding Share Award presented in 45-ton bollard pull harbour tug boats, by Jurong SML Cross International’s Tidal Wave Asia Fund for families and Health Training Department) in recognition of sound recognition of sustained participation rate at platinum to Pacific Workboats affected by the tsunami disaster management systems and good safety performance. level for five consecutive years
26 27 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
the Group, its plans and prospects. Additional board INTEGRITY Name of Director Position held Date of first Date of last Nature of meetings are also held to deal with ad-hoc matters of on the Board appointment re-election Appointment We believe in and perform our duties with significance as well as immediate issues facing the Group. to the Board as Director A total of four board meetings were held in the year and honesty, dedication and responsibility. we achieved an average of 87.5 per cent Board Wong Kok Siew Chairman May 20, 1998 April 28, 2004 Non-Executive/ We value loyalty, trustworthiness, attendances in the year. (deceased) Non-Independent reliability and openness as essential Tan Kwi Kin President & CEO April 1, 1990 April 17, 2003 Executive/ Non-Independent personal attributes in our corporate The Board has adopted a set of internal controls that sets out approval limits for capital expenditure, investments Tan Pheng Hock Director April 16, 2001 April 28, 2004 Non-Executive/ culture. and divestments, bank borrowings and cheque signatories’ Non-Independent arrangements at board level. Approval sub-limits are also Kiyotaka Matsuzawa Director September 30, 2001 May 30, 2002 Non-Executive/ Corporate Governance Report provided at management levels to facilitate operational Independent efficiency. Low Sin Leng Director November 14, 2002 April 17, 2003 Non-Executive/ Overview Non-Independent To give effect to the efficient discharge of its responsibilities Tan Tew Han Director April 17, 2003 April 28, 2004 Non-Executive/ SembCorp Marine’s corporate governance principles are and to provide independent oversight of Management, Independent built on the core values of integrity and commitment. the Board has established a number of Board Committees, Ajaib Haridass Director October 31, 2003 April 28, 2004 Non-Executive/ They reflect our strong belief in protecting and enhancing including the Audit Committee and Executive Resources Independent shareholder value in a sustainable way. We firmly believe & Compensation Committee and Nominating Committee. Haruo Kubota Director July 15, 2004 N/A Non-Executive/ that the professionalism, integrity and commitment of our These key committees are made up of independent or Independent non-executive directors. Other ad-hoc committees can Board members and employees of the Group, supported Heng Chiang Gnee Alternate Director April 6, 2001 N/A Executive/ by a sound system of policies, practices and internal be formed from time to time to look into specific areas Non-Independent controls are the success elements that will enable us to when the need arises. preserve long-term value and returns for our shareholders. Membership of the Board is diverse, comprising business Formal Appointment and Re-election of Directors Membership in the different committees is carefully leaders, professionals with financial backgrounds, managed to ensure that there is equitable distribution of This report outlines SembCorp Marine’s corporate a practising lawyer and members of the public sector. SembCorp Marine believes that all directors should responsibilities among board members, to maximise governance processes and activities for the financial year. Profiles of the directors are found on pages 36 to 38 of be submitted for re-election at regular intervals, subject the effectiveness of the board and foster active this Annual Report. The Board is favourably composed to continued satisfactory performance. The President, participation and contribution from board members. Board of Directors of a majority of non-executive directors, independent of while also a Board member, is also subject to Diversity of experiences and appropriate skills are management and independent in terms of character and retirement and re-election by shareholders as part also considered. Effective Board To Lead and Effect Controls judgement. This enables the Management to benefit from of board renewal. Nominations and election of Board an external and objective perspective on issues that are members are the prerogatives and proper rights of all Strong and Independent Board Exercising Objective The key roles of the Board include: brought before the Board. shareholders and the Board ensures the planned and Judgement progressive refreshing of its members. • Providing entrepreneurial leadership and directions of The Board considers non-executive director, The Board comprises eight directors and one alternate the Group Ajaib Haridass, an independent non-executive director, The Company’s Articles of Association require one-third director of whom seven are non-executive directors. • Ensuring prudent and effective controls although he has a relationship with the Group by virtue of directors to retire and subject themselves to re-election The Board’s Chairman was Mr Wong Kok Siew until his • Setting values and standards to ensure obligations to of his position as a managing partner of Haridass Ho, by shareholders at every Annual General Meeting demise in February 2005. The executive director is shareholders are met which renders professional services to the Group. (one-third rotation rule). In other words, no director stays Tan Kwi Kin who is also the President and CEO of • Overseeing the proper conduct of the Group’s business Notwithstanding this relationship, the Board assesses in office for more than three years without being re-elected SembCorp Marine. Mr Heng Chiang Gnee, him as an independent director due to his manifest ability by shareholders. alternate director to Tan Kwi Kin, is the Deputy President. The Board schedules four meetings a year to review and to exercise strong independent judgement in his discuss reports by management on the performance of deliberations in the interests of the Group. 28 29 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
In addition, a newly-appointed director will submit himself directors in particular and ensures constructive relations Board’s decision as well as on-going reports relating to namely Tan Tew Han as Chairman, Ajaib Haridass and Haruo for retirement and election at the Annual General Meeting between executive and non-executive directors. He also operational and financial performance of the Group. Kubota as members. During the year under immediately following his appointment. Thereafter, he is ensures that the members of the Board work together Where a physical Board meeting is not possible, timely review, the Committee held five meetings. All members subject to the one-third rotation rule. with the Management in constructive debate on various communication with members of the Board is effected participated actively at these meetings. matters, including strategic issues and operational issues. through electronic means, which include electronic mail, The Board does not believe it is possible to compile a teleconferencing and videoconferencing. Alternatively, The main responsibility of the Audit Committee is to list of criteria that are appropriate to characterise, in all Board Performance and Conduct of its Management will arrange to personally meet and brief review with the external auditor, internal auditor and circumstances, whether a non-executive director is Affairs each director before seeking the Board’s approval. Management, the Group’s general policies and independent. It is the approach and attitude of each non- control procedures, interested persons transactions, executive director that is critical. The Board aims for To ensure that directors are well equipped and trained, The Board has separate and independent access to the as well as any matters or issues that affect the diversity of knowledge and experience among its members Management addresses directors’ training needs. Newly- President, members of senior management and the Company performance of the Group. The Committee reviews the in relation to the various businesses of the Group and the appointed directors are given briefings by the Management, Secretary at all times. The Board also has access to quarterly, half-yearly and annual results announcements as international nature of the Group. The Board through the and facility visits to the premises are arranged to enable independent professional advice where appropriate. well as the financial statements of the Group and Company delegation of its authority to the Nominating Committee, them to acquire an understanding of the Group, its before they are submitted to the Board for approval. It also has used its best efforts to ensure that directors business activities and its strategic directions. One such Likewise, the Audit Committee must also meet the external recommends the appointment of the Company’s external appointed to the Board possess the background, in-depth orientation programme and facility visit was and internal auditors separately at least once a year, auditors. experience and knowledge in technology, business, conducted on July 30, 2004 for an Independent Director. without the presence of the President and other senior finance and management skills critical to the Group’s management members, in order to have free and unfiltered The Audit Committee meets with the external and internal businesses and that each director with his special Changes to regulations and accounting standards are access to information that it may require. Auditors, without the presence of Management, at least contribution brings to the Board an independent and monitored closely by Management. To keep pace with once a year to review the cooperation and assistance given objective perspective to enable balanced and well- regulatory changes, where these changes have an important The Company Secretary assists the Chairman with the by Management to them. considered decisions to be made. bearing on the Group’s or directors’ disclosure obligations, preparation of meetings’ agenda, attends and prepares directors are briefed either during board meetings or at minutes of board proceedings, ensuring good The Audit Committee has reviewed the non-audit services Our Boards are periodically renewed to ensure strong specially-convened sessions, such as trainings and seminars information flows within the Board and its Committees. provided by its external auditors to the Group, and is satisfied and sound leadership at the Board level to enable a conducted by external professionals. She assists the Board on the compliance issues to the that the provision of non-audit services by the external refreshing of talent as well as encourage dynamics of an Memorandum and Articles of Association, requirements auditors did not impair their independence as external independent and balanced Board composition. Where necessary, further external advice and consultants’ of the Companies Act and the Singapore Exchange auditors. services are made available to our directors before Securities Trading Limited. She is also the primary Clear Division of Responsibilities at the Top important decisions are made by the Board. All the issues channel of communication between SembCorp Marine The Executive Resource & Compensation Committee are actively debated by the Board and properly recorded. and the Singapore Exchange Securities Trading Limited, There is a clear separation of the roles and responsibilities the Accounting and Corporate Regulatory Authority The Executive Resource & Compensation Committee is between the Chairman and the President. The late Informal reviews of a Board’s performance are and shareholders. chaired by Wong Kok Siew (deceased), and its members Chairman Mr Wong Kok Siew and Mr Tan Kwi Kin were undertaken on a continual basis by the Nominating are Tan Tew Han and Ajaib Haridass. It oversees executive not related to each other. Committee with inputs from the other Board members Board Committees compensation and development with the aim of building and the President. The Board is constantly reviewed to capable and committed senior management through focused The Chairman, who is a non-executive, is responsible for ensure strong, independent and sound leadership for the The Company has three board committees: management and progressive policies that can attract, the leadership of the Board, ensuring its effectiveness on continued success of the business of the Group. (a) Audit Committee; motivate and retain talented executives to meet the current all aspects of its role and setting its agenda. He acts (b) Executive Resource & Compensation Committee; and future needs of the Group. independently in the best interests of the Group and Full Access to Information and Resources for (c) Nominating Committee shareholders. The President is charged with the executive Directors The Committee reviews and approves remuneration and responsibility of running the Group’s business. The Audit Committee promotion of key executives as well as to decide on issues The Chairman facilitates the contribution of non-executive Management provides adequate and timely information pertaining to their development and succession. Hence, it to the Board on Board affairs and issues that require the The Audit Committee comprises three independent directors, also establishes guidelines on share options and other long-
30 31 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
term incentives plans and approves the grant of such to consult externally. In its deliberations, it takes into Communication with Shareholders his or her behalf at the meeting through proxy forms sent in incentives to key executives. The underlying philosophy is consideration industry practices and norms in compensation. advance. to motivate executives to maximise operating and financial The President is not present during the discussions relating Regular, Effective and Equal Treatment of Shareholders performance and shareholder value. On an annual basis, to his own compensation, terms and conditions of service, The Chairman, President as well as the Chairman of the Audit the Committee conducts a succession planning review of and the review of his performance. We believe that our shareholders must be given a fair and Committee would be present together with the Chief Financial the President, all his direct reports, and selected key positions accurate view on the affairs of our company on an ongoing Officer, the Company Secretary and our external auditors to in SembCorp Marine. Potential internal and external The Committee meets among its members without the basis. As co-owners of SembCorp Marine, they are entitled answer questions raised by shareholders. Minutes of shareholder candidates for succession are reviewed for different time presence of Management, at least once a year. For the year to timely and complete information on financial data, material meetings are available on request by registered shareholders. horizons of immediate, medium-term and longer-term needs. in review, it held three meetings and achieved full attendance. developments as well as an understanding of our business directions and prospects. For further details on SembCorp Marine communications with The Committee further reviews the remuneration of its non- Nominating Committee its shareholders, see the “Investor Relations” section of the executive directors, executive director and senior executives, All SembCorp Marine’s price-sensitive information is disseminated Annual Report. as well as major human resource management and The Nominating Committee is chaired by Wong Kok Siew publicly so as to be available to all shareholders at the same compensation policies and practices for the rest of the (deceased), and its members are Tan Tew Han and Ajaib time and not on a selective basis. Financial and other Dealings in Securities Group. While the Committee’s Chairman was not regarded Haridass. performance data is given for the Group as well as by business as independent within the context of the definition of units or divisions, where appropriate. This will allow our SembCorp Marine has adopted a Code of Compliance on “independence” in the Code, he was a non-executive director The primary purpose of the this Committee is to support shareholders better insight into the earnings drivers within Dealing in Securities, which prohibit dealings in the Company’s independent of Management with a clear separation of his and advise the Company, its unlisted subsidiaries and, where SembCorp Marine. securities by its officers during the period commencing two role from Management in deliberations of the Committee. applicable, unlisted associated companies by nominating weeks prior to the announcement of the quarterly results. suitable candidates who are best able to discharge their During the release of earnings results, the announcement is Directors and executives are also expected to observe insider- The Committee also has access to expert professional responsibilities as directors. This means evaluating the first released by MASNET onto the SGX website. Thereafter trading laws at all times even when dealing in securities within advice on human resource matters whenever there is a need balance of skills, knowledge and experience of these boards a briefing or teleconference by Management is held for the the permitted trading period. and assessing the candidates for their regard for the law media and analysts. All materials used at the briefing will be and the high standards of governance practised by the available on SGXNET as well as the Company website at Interested Person Transactions Group. Appointments to these boards are made on merit www.sembcorpmarine.com.sg Chairman Tan Tew Han and against objective criteria. The Nominating Committee Shareholders have adopted a shareholders mandate also takes care to ensure that appointees have enough Following any release of earnings or price-sensitive developments, relating to interested person transactions of the Group. time available to devote to their directorship roles. our investor relations staff are available by email or telephone The mandate sets out the levels and procedures to Members to answer questions from shareholders and the media as long obtain approval for such transactions. Information Ajaib Haridass Haruo Kubota as the information requested does not conflict with the rules regarding the mandate is available on the Company’s Chairman of fair disclosure set by the Singapore Exchange Securities website at www.sembcorpmarine.com.sg. All strategic Wong Kok Siew (deceased) Trading Limited. business units are required to be familiar with the mandate Audit and report any such transactions to the Company’s Finance Committee Members Greater Shareholder Participation at General Meetings Department, which keeps a register of the Company’s Tan Tew Han interested person transactions. Information on interested Ajaib Haridass Chairman The Group recognises that good corporate governance requires person transactions for 2004 is found in page 181. Wong Kok Siew Executive Resource & (deceased) active participation of shareholders in the decision-making at
Chairman Wong Kok Siew the general meetings of shareholders. SembCorp Marine Internal Control and Audit (deceased) Directors Compensation Committee encourages shareholder participation at general meetings. Tan Kwi Kin Members Tan Pheng Hock Tan Tew Han Information on meetings of shareholders are made through A Sound and Independent System of Internal Control K. Matsuzawa Tan Tew Han Ajaib Haridass notices published in the newspaper and reports or circulars and Audit Low Sin Leng Ajaib Haridass sent to all shareholders. If any shareholder is unable to attend, Haruo Kubota Nominating Heng Chiang Gnee he or she is allowed to appoint up to two proxies to vote on The internal audit function of the Company is supported by (Alternate Director) Board Composition and Committees Committee 32 Board of 33
Directors SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
the Internal Audit Department, which reports on audit matters As new risks emerge and risk impacts change, SembCorp Type of Appointment The Company A “bonus bank” is used to hold incentive compensation credited directly to the Audit Committee Chairman and administratively Marine would continuously review the programme implemented $ in any year. Typically, one-third of the available balance is paid to the President. This department plans its internal audit schedules to stay ahead in risk mitigation and prevention plans. (i) Board of Directors out in cash each year, with the balance being carried forward in consultation with, but independent of Management, and its An Enterprise Risk Management Audit programme would also - Basic fee 25,000 to the following year. Such carried-forward balances of the plan is submitted to the Audit Committee for approval at the be designed and conducted to ensure effective compliance of - Chairman’s allowance 35,000 bonus bank may either be reduced or increased in future, beginning of each year. risk control and monitoring. - Vice Chairman’s allowance 20,000 based on the yearly economic-value-add performance of the (ii) Audit Committee Group and subsidiary. To ensure that the internal audits continue to be performed by Competitive Remuneration Report - Chairman’s allowance 20,000 competent professionals, the Internal Audit Department continues - Members’ allowance 10,000 The Board has decided not to prepare a separate remuneration to recruit and employ suitably qualified staff. The internal audit Adequate, Not Excessive Directors’ Remuneration of (iii) Executive Resource & report as most of the information is found in the directors’ function provided by the department continues to meet with Directors Compensation Committee / report. We have indicated in this Report where the information the standards set by the Institute of Internal Auditors. Nominating Committee required to be disclosed can be found. The President, as executive director, does not receive director’s - Chairman’s allowance 15,000 Rather than set out the names of the top key executives who Enterprise Risk Management fees. He is a lead member of Management. His compensation - Members’ allowance 10,000 are not also directors of the Company, we have shown the consists of his salary, allowances, bonuses, performance share number of key employees in remuneration bands of S$250,000 Our Enterprise Risk Management programme developed a awards conditional upon his meeting certain performance Notes: from S$100,000. This should give a macro perspective of the risk management framework comprising guidelines and targets (details are available on page 180 of the Annual Report) Mr Tan Kwi Kin, as an executive director, does not receive director’s fee remuneration pattern in the Company, while maintaining the worksheets. This framework was rolled out to our major and options. Details on share options granted and its fair value confidentiality of staff remuneration matters. shipyards, where they were undergoing different phases of are available on pages 127 to 129 and page 180 of the Annual Competitive Rates to Encourage and Retain Key implementation at year-end. Sembawang Shipyard had Report, respectively. Executives integrated the Enterprise Risk Management programme into SembCorp Marine adopts an incentive compensation plan for Remuneration Band for Key Executives the management system and was in the final stage of developing Non-executive directors have remuneration packages that key executives tied to the creation of economic-value-add as the various risk treatment measures. Jurong Shipyard had consist of a directors’ fee component according to the well as to attainment of individual performance goals. Remuneration Band No. of Employees identified its key processes and related key risks and was Company’s Directors’ Fee policy, an attendance fee component An individual’s incentive compensation is linked to the economic- $250,000 to $499,999 7 assessing the risk impact and developing the risk treatment and a share options component according to the Company’s value-add created by the Company and its subsidiaries. $100,000 to $249,999 - measures. PPL Shipyard had also identified its key processes, Employee Share Option Plan. The Directors’ Fee policy is based focusing on the project and contract management, and was at on a scale of fees divided into basic retainer fees as director the stage of assessing the related risks and developing policies and additional fees for attendance and service on board Board/Committees Board Committees and procedures for risk treatment measures. committees (details are available on page 32 of the Annual Board Audit ERCC NC Report). Details on share options granted and its fair value are No. of meetings held 4 5 3 - The Enterprise Risk Management programme sought to available on pages 127 to 129 and page 180 of the Annual Directors Number of Meetings Attended identify, assess, review and develop existing or new risks in the Report, respectively. Wong Kok Siew (deceased) 4NA3 NA business processes. During the year, special focus was placed Tan Kwi Kin 4 NA 3 NA on HSSE (health, safety, security and environment) and project The basis of allocation of the number of share options takes Tan Pheng Hock 4 NA NA NA management. Key risks for the two processes were identified into account a director’s contributions and additional Kiyotaka Matsuzawa 3 3 of 4 NA NA and assessed, and existing safety and project management responsibilities at board committees. The report on directors’ (Resigned as Audit Committee member on September 15, 2004) policies and procedures were reviewed to assess their adequacy. remuneration is found on page 180 of the Annual Report. Low Sin Leng 3 NA NA NA From there, steps were taken to minimise the risk impact. We believe that our directors are adequately compensated and Tan Tew Han 4 5 3 NA While HSSE would always be an area of concern in the marine in line with market norms. Ajaib Haridass 4 5 3 NA industry, project management was also deemed important in Haruo Kubota 2 of 2 1 of 1 NA NA (Appointed Director on July 15, 2004 and Audit Committee allowing the Group to deliver according to contract terms and The directors’ remuneration for 2004 is $337,000 member on September 15, 2004) manage costs amidst rising material costs and fluctuating ($332,332 in 2003) and is derived using the following rates: Naoteru Tsuda 0 of 2 NA NA NA foreign exchange. (Resigned as Director on July 15, 2004)
34 35 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
Board of Directors
Wong Kok Siew Tan Kwi Kin Tan Pheng Hock Kiyotaka Matsuzawa Low Sin Leng Tan Tew Han Chairman (deceased) President Director Director Director Director
The late Mr Wong had been a director since Mr Tan Kwi Kin, currently the President and Mr Tan Pheng Hock was appointed a director Mr Kiyotaka Matsuzawa has been a director Ms Low Sin Leng was appointed a director Mr Tan Tew Han was appointed a director May 20, 1998 and had served as Chairman Chief Executive Officer of SembCorp Marine, on April 16, 2001. Currently, he is the of SembCorp Marine since September 30, on November 14, 2002. She is currently of SembCorp Marine on April 17, 2003. He of SembCorp Marine since June 1999 until has been a director of the Board since President and Chief Executive Officer of 2001. He has had a distinguished career in the Senior Executive Director at the CEO’s brought with him an impressive 25 years of his demise on February 16, 2005. He was April 1, 1990. Mr Tan has 39 years of working Singapore Technologies Engineering. During IHI where he was the former General office of SembCorp Industries and banking experience. He held several senior also the Deputy Chairman and Chief experience in Jurong Shipyard having started his 16 years of shipyard experience with Manager of Ships & Offshore Department. concurrently the Executive Chairman of positions in Citibank, Banque Paribas, Bank Executive Officer of SembCorp Industries. his career in 1966 as a Junior Engineer in Singapore Technologies Marine, he led the He is presently the Managing Director of IHI SembCorp Parks Holdings and SembCorp of America, International Bank of Singapore From 1989 to 1995, he was President of the Design Department. He was promoted computerisation of the company’s processes Marine United Inc. Japan prior to his previous Parks Management and Chairman of and Overseas Union Bank. Prior to his Singapore Technologies Industrial to Manager in charge of Production Control and operations and the building of a position as Managing Director of IHI Marine SemHotel Management. She is also retirement in 2001, he had been the Executive Corporation and then Chairman of the in 1977 and General Manager in 1981. In shipyard. Prior to his current appointment, Engineering (Singapore) since July 2001. Chairman of Pacific Internet, Deputy Vice President and Head of Investment company until its merger with Sembawang 1990, he was appointed Managing Director. he held several key appointments including In 1978, he was assigned to IHI’s Brazilian Chairman of SembCorp Utilities and Director Banking and Corporate Finance Division in Corporation to form SembCorp Industries When Sembawang Shipyard merged with Executive Vice President of Singapore subsidiary company ISHIBRAS as the of Singapore Computer Systems. From OUB since 1993. His other board in October 1998. Mr Wong was also the Jurong Shipyard in 1997, Mr Tan was Technologies Marine and President of General Manager for eight years where he 2000 to 2004, Ms Low was the Group Chief appointments include his appointments Chairman (non-executive) of Nomura appointed President of the Jurong Singapore Technologies Kinetics. His other initiated and promoted ship exports from Operating Officer of SembCorp Industries at PanPac Media Group, ST Asset Singapore and was executive Chairman of Shipyard group of companies. Following a board appointments are with Singapore Brazil to clients worldwide under the Brazilian and from 1995 to 2000, the Executive Vice Management and Full Apex (Holdings). Nomura from 1995 to 1998. He was also restructuring and a name change in Technologies Kinetics, Singapore Government Promotion Program. Mr President of Singapore Power. Between Mr Tan graduated from the University of the Chairman of International Enterprise November 1999, Mr Tan became the Technologies Electronics, Singapore Matsuzawa graduated from Hitotsubashi 1975 and 1995, she held several key senior Singapore with a Bachelor of Science Singapore (formerly known as the Trade President and Chief Executive Officer of Technologies Aerospace and Singapore University, Japan with a Bachelor of positions in the civil service. As a President (Honours) in 1970 and obtained an MBA in Development Board of Singapore) since SembCorp Marine and Chairman of Jurong Technologies Marine. Mr Tan graduated with Economics. He also holds a Diploma in Scholar, Ms Low graduated with a Bachelor 1978 from the University of British Columbia, August 2002. Other directorships in public Shipyard. His also chairs the boards of PPL a Bachelor of Marine Engineering (First Class) Business Administration from the Federal of Engineering (First Class Honours) from Canada. listed companies included SembCorp Shipyard, JPL Corporation, Jurong from the University of Surrey under a University of Bahia, Brazil. the University of Alberta, Canada. She further Logistics, BIL International, British American Integrated Services and Jurong Machinery Colombo Plan Scholarship. He further holds holds a Master of Business and Tobacco (London), Camerlin Group and and Automation. Mr Tan graduated from a Masters of Science in Management from Administration (High Distinction) degree from RSH Limited. Mr Wong graduated from Tokyo University, Japan, in 1965 with a Stanford University and has attended the the Catholic University of Leuven, Belgium McGill University in Canada in 1970 with a Bachelor of Engineering (Mechanical). Advanced Management Program at Harvard and has attended the Advanced Bachelor of Engineering (Distinction) under University in 1999. Management Program at the Harvard a Colombo Plan Scholarship and also held Business School in 1994. an MBA from McMaster University, Canada.
36 37 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
Ajaib Haridass Haruo Kubota Heng Chiang Gnee Director Director Alternate Director
Mr Ajaib Haridass was appointed a director Mr Haruo Kubota was appointed a director Mr Heng Chiang Gnee was appointed as on October 31, 2003. He set up the legal of SembCorp Marine on July 15, 2004. an alternate director on April 6, 2001. firm, Haridass Ho & Partners in 1985 where He is currently the Managing Director of IHI Currently, he is the Deputy President of he is now the Managing Partner. He brings Marine Engineering (Singapore). From 2002 SembCorp Marine and Chairman of with him more than 28 years of legal to 2004, Mr Kubota was General Manager Sembawang Shipyard. Prior to this, experience specialising in all admiralty of IHI Marine Co. Ltd with a portfolio covering Mr Heng was involved with business matters, both litigious and non-litigious, the sales headquarters of an affiliate development and project management in including ship sale and purchase and their company. Prior to this, he was the General Sembawang Shipyard. His previous financing aspects, marine insurance and Manager of the Ship Design Department at employment with the Singapore Technologies general commercial and banking litigation. Kure Shipyard for five years since 1997, Group involved businesses covering Mr Haridass sits as an arbitrator and responsible for all design activities. He started shipbuilding, ship repairing, ordnance, aircraft mediator, as an accredited mediator of the his career with Ishikawajima-Harima Heavy engine manufacturing and lifestyle Singapore Mediation Centre. He is also a Industries Co. Ltd (IHI) in 1972. Mr Kubota entertainment. He is also the President of member of the Advisory Committee of the graduated from Tohoku University with a the Association of the Singapore Marine Singapore Chamber of Maritime Arbitration Bachelor of Mechanical Engineering in 1972. Industries and Chairman of the Shipbuilding and President of the Maritime Law and Offshore Engineering Advisory Association of Singapore. He is a referee of Committee of Ngee Ann Polytechnic. the Small Claims Tribunal and a mediator Mr Heng graduated from the University of at the Criminal Relational Disputes. He is Newcastle-Upon-Tyne, United Kingdom, also a Commissioner for Oaths, a Notary with a Bachelor of Marine Engineering (First Public and a Justice of Peace. Mr Haridass Class). He also obtained a Master of Science graduated from the University of London (Management) from the Sloan School of with a Bachelor of Law (Honours) and was Management, Massachusetts Institute of called to the English Bar at the Middle Technology, United States, and attended the Temple in 1975. He was admitted as an Harvard University’s Advanced Management Advocate & Solicitor of the Supreme Court Program. of Singapore in 1976.
38 39 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
Key Management Profile
Tan Kwi Kin Wee Sing Guan Ong Poh Kwee
Mr Tan Kwi Kin is the President and CEO Mr Wee has been the Chief Financial Officer Mr Ong has been the Managing Director of SembCorp Marine and a Director of of SembCorp Marine since February 2000. of Sembawang Shipyard since July 2004. SembCorp Marine Board. He first joined the company as an He formerly held the positions of Executive (Mr Tan’s profile can be found on page 36) accountant in 1974 and later held the Director of Sembawang Shipyard and position of Financial Controller before General Manager and the Managing assuming his current appointment. Mr Wee Director of Karimun Sembawang Shipyard. Heng Chiang Gnee graduated from Nanyang University in 1972 He joined the company in 1987 as an with a Bachelor of Commerce. engineer, the same year he graduated Mr Heng Chiang Gnee is the Deputy from the University of Newcastle-Upon- President of SembCorp Marine and Tyne, United Kingdom, with a Bachelor an Alternate Director of SembCorp Tan Kwi Kin Heng Chiang Gnee Wong Weng Sun Wong Peng Kin of Marine Engineering. President & CEO Deputy President Deputy President Marine Board. Managing Director, Jurong Shipyard (Mr Heng’s profile can be found on page 38) Mr Wong has been a Director of Group Human Resource at SembCorp Marine since Wong Lee Lin Wong Weng Sun July 2004. From February 2000 to June 2004, he was the Senior Vice President of Ms Wong has been the Executive Director Mr Wong has been the Deputy President Human Resources. He joined the company of Sembawang Shipyard since July 2004. of SembCorp Marine since July 2004 and in 1970 as an officer in the Personnel Prior to that, she was the General Manager the Managing Director of Jurong Shipyard. Department. Mr Wong graduated from the at Sembawang Shipyard since January 2002. From January 2000 to June 2004, he was University of Singapore with a Bachelor of Ms Wong graduated from the University of Jurong Shipyard’s Executive Director. Business Administration (Hons) in 1970. Singapore with a Bachelor of Social Sciences He joined the company in 1988 as an (Hons) in 1974 and joined the company as engineer and was later appointed General an officer in 1975. Manager in charge of project management. Lee Yeok Hoon Mr Wong graduated from the University Technology of Malaysia in 1986 with a Mr Lee has been the Executive Director of Ong Tian Khiam Wee Sing Guan Wong Peng Kin Lee Yeok Hoon Bachelor of Mechanical Engineering (Marine). Jurong Shipyard since July 2004. Chief Financial Officer Director Executive Director From February 2000 to June 2004, he was Mr Ong has been the Managing Director of (Group Human Resource) Jurong Shipyard He also obtained a Master in Business Administration degree from Oklahoma City the General Manager in charge of production PPL Shipyard since November 1997. University in the United States in 1994. in Jurong Shipyard. He joined the company Prior to that, he held positions as Deputy in 1970 as a Design Engineer after Managing Director and Managing Director in graduating from Singapore Polytechnic with Sembawang Maritime and Sembawang a Diploma in Mechanical Engineering. Bethlehem respectively. He was also the Managing Director in charge of the development of Karimun Shipyard. When Mr Ong graduated from the University of Singapore with a Bachelor in Mechanical Engineering in 1969, he joined Sembawang Shipyard as a Graduate Management Trainee. He then moved on to hold several positions at Far East Levingston Shipbuilding between 1970 and 1978 and at Promet Private Limited between 1978 and 1989 before rejoining the Ong Poh Kwee Wong Lee Lin Ong Tian Khiam Managing Director Executive Director Managing Director Group. Sembawang Shipyard Sembawang Shipyard PPL Shipyard
40 41 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
Investor Relations management played an active role in conducting regular We also invited the analysts, press media and investors saw an increase in turnout of 180 persons in 2004, meetings with shareholders and investors. to christening ceremonies for the benefit of understanding compared to 100 in 2003. SembCorp Marine continued to strengthen investor the nature of the business, touring the vessels, interacting In addition to the briefing and presentation meetings confidence by promoting greater corporate transparency, with management and listening to the customers’ views Recognition for High Standard of Disclosure held as part of the mandatory reporting cycle, timely announcement, Board independence, exemplary on the outlook of the industry. regular meetings were held at the requests of the analysts, board practices and active communication with key For effective, full and prompt disclosure to stakeholders, investors and fund managers, both local and foreign. stakeholders. Our commitment to investor relationships SembCorp Marine’s 2002 Annual Report received a Merit The President, Deputy Presidents, Chief Financial Officer, often extends beyond regulatory requirements. Award at the 30th Annual Report Awards held on March the Vice President of Finance and the Senior Vice 11, 2004. President of Investor Relations personally attended to Communication with Shareholders these meetings. The Annual Report Awards is a yearly competition aimed at encouraging a wider scope of disclosures beyond the Our investor relations programme continued to be an In order to help the analysts and investors to get a better minimum regulatory requirements. The Merit Award was important and integral part of our commitment to high understanding of the nature of our business, we accorded to our annual report for its high standards of standards of corporate governance. As such, our senior organised periodic site tours of our shipyard facilities. excellence in voluntary disclosure, attractive presentation Shareholder Participation at Company Meetings and comprehensive information. Out of 498 eligible Investor Relations Calendar companies listed on the Singapore Exchange as of 2004 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Encouraging the full participation of shareholders at our September 30, 2003, SembCorp Marine was among 36 companies shortlisted, eventually chosen as one of 15 2003 Full Year Feb 5 Annual General Meeting, we arranged for buses to transport Results Media & shareholders from a convenient MRT station to our registered mainboard-listed companies to win the award after a Media & Analysts Analysts stringent selection process. Briefing Briefing office at 29 Tanjong Kling Road. We believed that the holding 1Q 2004 Results May 4 of the meeting at our registered office would offer shareholders Announcement (Masnet) Before the restructuring and a name change, the Group, via Masnet the opportunity to visit the shipyard and acquire hands-on then known as Jurong Shipyard, had received the Grand 2Q 2004 Results Aug 2 knowledge of our shipyard operations. At the same time, Announcement Media & they would be able to interact with the Chairman, the Board Award in 1995 for winning the Best Annual Report Awards Media & Analysts Analysts for three consecutive years in a row, and the Meritorious Briefing Briefing of Directors and senior managers within the SembCorp and Best Annual Report Award in 1993 under the single- 3Q 2004 Results Oct 29 Marine Group of shipyards. With the convenience of Announcement (Masnet) industry category. via Masnet transportation, attendance to the Annual General Meeting Interim Dividend Aug 31 Payment Final Dividend May 18 Payment (2003) Delivery of April 13 Annual Report Annual General Meeting April 28 Regular Meetings All Year Luncheon Jun 22 Aug 5 Sept 15 Dec 6 Meetings with CLSA Soloman GK Goh UBS Fund Managers Smith Road Show Nov (in Europe) 15 - 19 Familiarisation Apr 12 Nov 30 Dec 9 Tours Tour of Yard Christening Tour of Rig
42 43 SembCorp Marine Ltd • Annual Report 2004 Corporate Governance
& Transparency LEVERAGING STRENGTHS. BUILDING SYNERGY.
Shareholders’ Information Share Prices and Monthly Volumes Statistics of Shareholdings as at March 12, 2005 5.5 280 Share Capital Investor Data 2000 2001 2002 2003 2004 Authorised Share Capital : $500,000,000 270 Earnings per share (cents) 5.72 5.89 6.54 5.55 6.68 Issued and Fully Paid-up Capital : $143,420,280 Gross Dividend per share (cents) 6.44 6.50 6.50 5.00 7.50 Number of Shareholders : 4,300 260 Net Dividend per share (cents) 4.84 5.03 5.07 3.97 6.00 5.0 Class Shares : Ordinary Share of $0.10 each with equal voting rights Share price ($) 250 High 0.83 0.96 1.10 1.06 1.36 Low 0.63 0.63 0.79 0.88 0.865 Shareholding Held in Hands of Public 240 Close 0.70 0.70 0.905 0.96 1.36 Based on information available to the Company as at March 12, 2005, 37.23% of the issued ordinary shares of the Company is held by Turnover Volume (Million share) 256.80 326.20 782.53 346.20 278.1 4.5 the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with. 230 Value ($million) 184.50 266.80 731.90 338.21 285.2 Substantial Shareholders Average P/E 12.70 14.10 16.40 14.50 17.80 220 Net Tangible Assets per share 63.72 64.41 65.65 64.60 67.20 (cents) Direct Interest Deemed Interest 210 Substantial Shareholders Number of Shares % Number of Shares % 4.0 SembCorp Industries Ltd 900,231,260 62.77 - - 200 (1) Temasek Holdings (Private) Limited - - 902,174,260 62.90 190 Notes: 3.5 (1) 180 Temasek Holdings (Private) Limited is deemed to be interested in the 900,231,261 Shares held by SembCorp Industries as well as the balance of 1,943,000 Shares held by its other subsidiaries.
170
List of 20 Largest Registered Shareholders Shareholders Location Distribution 160 3.0 Share Price / ST Index No. Name Shareholdings % Location No. of % No. of Shares % Holders 150 1 SembCorp Industries Ltd 900,231,260 62.77 Singapore 4,169 96.95 1,368,221,700 95.40 2 DBS Nominees Pte Ltd 160,357,339 11.18 140 Malaysia 53 1.23 2,247,850 0.16 (million) Turnover 3 Raffles Nominees Pte Ltd 83,784,368 5.84 Hong Kong 12 0.28 275,000 0.02 130 2.5 4 IHI Marine United Inc 60,000,000 4.18 Japan 3 0.07 60,130,000 4.19 5 Citibank Nominees Singapore Pte Ltd 54,346,507 3.79 120 USA 7 0.16 48,000 0.00 6 HSBC (Singapore) Nominees Pte Ltd 46,660,876 3.25 UK 4 0.09 49,000 0.00 110 7 United Overseas Bank Nominees Pte Ltd 31,281,300 2.18 2.0 Europe 1 0.03 10,000 0.00 8 DB Nominees (S) Pte Ltd 3,576,000 0.25 100 Australia/ 19 0.44 501,000 0.04 9 OCBC Nominees Singapore Pte Ltd 3,090,000 0.22 New Zealand 90 10 Morgan Stanley Asia (S'pore) Sec Pte Ltd 2,948,950 0.21 Others 32 0.74 2,720,250 0.19 80 11 Seapac Investment Pte Ltd 2,480,000 0.17 Grand Total 4,300 100.00 1,434,202,800 100.00 1.5
12 Capital Intelligence Limited 1,850,000 0.13 70 13 Merrill Lynch (Singapore) Pte Ltd 1,564,503 0.11 60 14 Tan Kwi Kin 1,118,000 0.08 Shareholders Distribution 1.0 15 OCBC Securities Private Ltd 959,000 0.07 Size of Holdings No. of % No. of Shares % 50 16 G K Goh Stockbrokers Pte Ltd 935,387 0.07 Holders 40 17 Lucy Chee 900,000 0.06 1 - 999 49 1.14 19,691 0.00 18 Phillip Securities Pte Ltd 852,640 0.06 1,000 - 10,000 3,047 70.86 18,034,994 1.26 30 0.5 19 Heng Chiang Gnee 813,000 0.06 10,001 - 1,000,000 1,190 27.67 62,929,012 4.39 20 20 UOB Kay Hian Pte Ltd 798,000 0.06 1,000,001 and above 14 0.33 1,353,219,103 94.35 Total: 1,358,547,130 94.72 Grand Total 4,300 100.00 1,434,202,800 100.00 10 Turnover High 0 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M* Low ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ST index * till March 15, 2005. 44 45 SembCorp Marine Ltd • Annual Report 2004 Financial
Review LEVERAGING STRENGTHS. BUILDING SYNERGY.
Group Five-Year Performance Group Five-Year Financial Summary
The SembCorp Marine Group achieved record compounded annual growth rate (CAGR) in turnover and attributable profits (PATMI) for the five year period from 2000 and 2004. For the year 2000 2001 2002 2003 2004 ($ 000) ($ 000) ($ 000) ($ 000) ($ 000) Group turnover recorded a CAGR of 16 per cent from $0.76 billion in 2000 to $1.36 billion in 2004. Turnover 763,008 854,461 1,011,512 1,067,986 1,362,764 Group PATMI, excluding exceptional items reached a record high of $98.0 million while ROE Operating Profit 79,159 84,496 89,883 74,308 93,853 improved 19 per cent to 10 per cent. Profit Before Tax 96,075 103,392 116,291 95,186 114,009 Economic Value Added (EVA) attributable to Shareholders, excluding unusual items, was $12.2 PATMI Before EI 79,848 81,218 85,445 77,265 98,068 million. PATMI After EI 79,848 82,419 92,098 78,540 95,002 The Board of SembCorp Marine is proposing a final and special dividend of 6.0 cents per share Dividend — Interim 23,386 15,917 16,507 16,584 17,067 (less income tax), making a total annual dividend of 7.5 cents per share (less income tax). This Dividend — Final 44,175 54,963 55,159 39,814 68,525 dividend payout ratio at 90 per cent is the highest dividend payout in SembCorp Marine s history Dividend — Total 67,561 70,880 71,666 56,398 85,592 and is testimony to our unwavering commitment to distribute value to our shareholders. Group Balance Sheet 2000 Syndrome (SARS) outbreak in the region during the first half of Fixed Assets 411,997 429,914 447,886 452,720 460,020 In 2000, SembCorp Marine reported a 2 per cent growth in the year as well as the postponement of vessel repairs as a Associated Companies & JV 80,604 104,627 101,778 58,700 67,487 PATMI to $79.8 million despite a 17 per cent decline in turnover result of high freight rates. Other Investments 99,485 98,992 92,759 71,776 23,853 to $763.0 million. The lower turnover was the result of the Other Long Term Assets 126,099 168,273 203,913 172,254 88,071 deconsolidation of an associated company when it became a Group PATMI including exceptional items declined 15 per cent Current Assets 609,393 633,293 642,219 769,665 1,219,934 public listed company in March 2000 coupled with the lower to $78.5 million, compared to $92.1 million in 2002. The decline Current Liabilities (369,030) (446,859) (492,123) (531,173) (651,692) revenue contribution from our ship repair business due to strong was mainly due to subdued performance in ship repair as well Long Term Liabilities (58,197) (56,977) (46,128) (52,069) (204,963) competition from both local and regional shipyards. as lower exceptional gains of $1.3 million, compared to $6.7 million in 2002. 900,351 931,263 950,304 941,873 1,002,710 2001 Revenue increased 12 per cent to $854.5 million due to an If exceptional items and the effect of prior year tax over-provision Issued Capital 139,518 140,614 141,432 142,005 142,761 improvement in ship repair activities. Our PATMI increased 3 were excluded, the Group s PATMI would have declined by just Capital & Foreign Currency per cent to $82.4 million. The improvement in profitability came 8 per cent from $80.8 million in 2002 to $74.0 million in 2003. Translation Reserves 254,678 263,332 257,049 236,741 239,637 from an increase in ship repair volume and the maiden contribution Retained Profits 495,236 517,299 541,527 548,381 586,502 from our new associated companies in Brazil and PPL Shipyard. 2004 Minority Interests 10,919 10,018 10,296 14,746 33,810 2004 was a record year for SembCorp Marine again. Group 900,351 931,263 950,304 941,873 1,002,710 2002 turnover was at its record of $1.36 billion, a growth of 28 per SembCorp Marine revenue hit a high of $1.012 billion, 18 per cent from $1.07 billion in 2003. This growth was driven mainly cent higher than that achieved in 2001. The improvement was by increased revenue from both the ship conversion and ship Per Share Data (cents) due mainly to increased revenue from new building and ship repair sectors. The ship building and rig building sectors recorded EPS — Before Tax 6.89 7.39 8.26 6.72 8.02 conversion projects. declines as most of the projects were pending take-up or in the EPS — After Tax After EI 5.72 5.89 6.54 5.55 6.68 early stages of production as at end of 2004. Net Tangible Assets 63.72 64.41 65.65 64.60 67.20 Group pre-tax profit rose to a record $116.3 million. Exceptional Net Asset Value 63.75 65.52 66.46 65.29 67.87 items contributed $6.7 million, while the associated companies Group operating profit increased 26 per cent from $74.3 million and joint venture contributed $6.1 million. Group PATMI including in FY 2003 to $93.9 million in FY 2004. Group pre-tax profit Financial Ratios exceptional items grew by 12 per cent to $92.1 million. increased 20 per cent from $95.2 million in FY 2003 to $114.0 million in FY 2004. The increase was attributed to improvements Return on Equity 9.07 9.10 9.90 8.41 10.02 2003 in the ship conversion and ship repair sectors as well as from Return on Total Assets 5.92 5.97 6.30 5.21 5.61 2003 was a record year for the SembCorp Marine Group. increased contributions from a joint venture and associated Operating Margin (%) 10.4 9.9 8.9 7.0 6.9 Despite the difficult operating environment, Group revenue companies. Operating Profit/Equity (%) 9.0 9.3 9.7 8.0 9.9 attained a record high of $1.068 billion, 6 per cent higher than Current Ratio 1.65 1.42 1.30 1.45 1.87 2002 s $1.012 billion. This was attributable mainly to volume Net profit for 2004 reached a record high of $95.0 million, an Gearing Ratio 0.9% 2.8% 2.9% 10.9% 15.4% increases in ship conversion and new building projects, which increase of 21 per cent from $78.5 million in 2003. Excluding Dividend Cover 1.18 1.16 1.29 1.39 1.11 more than offset the decline in ship repair revenue. Our ship exceptional items, net profit grew by 27 per cent to $98.1 million repair business was affected by the Severe Acute Respiratory as compared to $77.3 million in 2003.
46 47 SembCorp Marine Ltd • Annual Report 2004 Financial
Review LEVERAGING STRENGTHS. BUILDING SYNERGY.
% $m 12 160 % cents
140 10 12 90
120 80 1363 8 10 70 100 9.9 8.02 6 8 6.68 60 80 10.02 93.9 6.9 50 60 4 6 9.7 1068 8.0 8.26 6.72 40 40 Operating Profit Margin 7.0 8.9 2 4 Turnover and Operating Profit Return On Equity and 8.41 5.55 30 9.90 74.3 20 9.9 Earning Per Share 6.54 1012 Return On Total Assets 5.61 20 $m 0 2 89.9 0 9.3 7.39 10.4 10 1,600 9.10 5.21 0 5.89 0 854 84.5 9.0 1,400 6.30 6.89 2004 2004 9.07 1,200 5.72 763 2004 79.2 2003 2004 1,000 2003 5.97
800 2003 2003 2002 2002 5.92 600 2002 400 2001 2001 2002
200 2001 $’m 2000 2001 0 2000
140 2000 Operating Profit Operating Profit Margin $m 2000
Turnover 120 Operating Profit/Equity 20 Return On Equity EPS - before tax 100 Return On Total Assets EPS - after tax after EI
12.2 10 114.0 80 19.4 95.0 98.0 6.20 60 0
95.2 40 Profit before Tax, PATMI before EI78.5 8.30 5.40 116.3 -10 Shareholders’ Returns 77.3 Economic Value Added (EVA) and PATMI after EI 92.1 20
-20 85.4 0 Return on Equity, EVA, Dividends and Earnings per The recommended 2004 dividend took into consideration the 103.4 8.40 Group s present cashflow position, positive cashflow generated 82.4 % Shares 8.94 81.2 (9.2) -30 The return on equity (ROE) improved 19 per cent to 10.0 per from operations and projected capital requirement. Payment 10 of the final proposed dividend is subject to the approval of 96.1 2004 (0.4) cent in 2004 as a result of the record profit achieved for the 79.8 2004 year under review. shareholders of the Company at the forthcoming Annual General 79.8 5 Meeting. 2003 2003 Economic Value Added (EVA) attributable to Shareholders, 0 excluding unusual item, was $12.2 million. To maximize shareholders value, management will continue its 2002 policy of paying high level of final dividends to return excess 2002 The Board of Directors of SembCorp Marine is proposing a final cash generation from operations where possible, as long as the 2001 and special dividend of 6.0 cents per share (less income tax), cash is not required for investments in the future. Some cash (27.3) 2001 making a total annual dividend of 7.5 cents per share (less resources will be required for set up of new facilities and capabilities to expand the existing operations and any potential 2000 income tax). This dividend payout ratio at 90 per cent will be 2000 the highest dividend payout in SembCorp Marine s history and mergers and acquisitions. Profit before tax testimony to our unwavering commitment to distribute value PATMI before EI EVA atributable to Shareholders (excl EI) to our shareholders. PATMI after EI Weighted Average Cost of Capital
48 49 SembCorp Marine Ltd • Annual Report 2004 Financial
Review LEVERAGING STRENGTHS. BUILDING SYNERGY.
$m
$’m 100 Cash Flow 600 90 The consolidated statement of cash flows of the Group for the year end 2004 is summarised below: 80 500 70 68.5 60 2004 2003 469 400 $’million $’million 50 Cash flow from operating activities 300 40 320 30 Operating profit 94 74 200 39.8 20 55.2 Depreciation, amortisation and non-cash items 30 31 Total Dividend, Net 10 100 0 Net Cash/ (Borrowings) 55.0 17.1 Operating income before reinvestment in working capital 124 105 203 0
Working capital changes 95 (22) 16.6 102 44.2 2004 Net interest received and payment of income tax (1) (24) 162 2004 135 16.5 2003 Net cash provided by operating activities 218 59 2003 15.9 199 190 2002 57 23.4 Cash flow from investing activities 39 (16) 31 2002 2001 cents 2001 9.0 Dividend paid to shareholders of the company and subsidiary companies (57) (72) 2000 8.0 Cash flow from other financing activities 121 68 2000 cents Interim 90.1 7.0 Cash flow from financing activities 64 (4) 9.0 Cash & Fixed Deposits Final 5.00 6.0 Net Cash 8.0 5.0 Free cash flow 321 39 7.0 7.50 4.0 6.0 71.7 3.0 6.00 5.0 77.8 2.0 Dividend Payout Record 2.50 Operating Activities Dividend Paid 4.0 85.8 4.00 1.00 1.0 3.0 % 4.00 0.75 0 During the year, the Group continues to generate healthy cash Dividend paid to the Company s shareholders amounted to $57 6.50 5.00 2.0 Gross Dividend vs Net Dividend 100 1.00 0.75 flow from operations. This amounted to $124 million before million or 5.0 cents per share in 2004. This included the final 3.97 84.3 1.0 90 changes in working capital. Working capital reduced by $95 and special dividend of 3.5 cents per share in respect of the 5.07 3.19 0.75 6.50 million mainly due to completion of a few major projects in our financial year ended 2003 and an interim dividend of 1.5 cents 0 80 1.00 0.75 2004 core business of ship repair, rig building and ship conversion. per share for 2004. 5.03 70 0.75 After accounting for interest and income tax payments, net cash 6.44 60 1.00 0.75 2003 from operating activities amounted to $218 million. The Directors are recommending a final dividend of 6.0 cents 2004 4.84 50 1.00 0.75 per share in respect of the financial year ended 2004 and an 0.75 2002 40 1.50 Investing Activities interim dividend of 1.5 cents per share for 2004. The total 2003 dividend for the financial year ended 2004 will be a record 7.5 30 0.75 2001 Net cash generated from investing activities amounted to $39 cents per share. The dividend payout ratio at 90 per cent will 20 2002 million mainly from the divestment of bonds and collection of be the highest dividend payout in SembCorp Marine s history 10 2000 proceeds from disposal of fixed assets and divestment of Bohai and testimony to reward to reward our shareholders. 0 Sembawang Shipyard. During the year, the Company acquired 2001 Interim Dividend an additional 5 per cent interest in Jurong Clavon Group, making it a 55 per cent owned subsidiary company of the Group. The 2000 Interim Special Group also purchased additional fixed assets of $89 million Final mainly for its core business of ship and rig repairing, building Gross Dividend Final Special and conversion. Net Dividend Dividend Payout Ratio
50 51 SembCorp Marine Ltd • Annual Report 2004 Financial
Review LEVERAGING STRENGTHS. BUILDING SYNERGY.
$m cents
2000 90
Simplified Group Financial Position 1800 80
1600 70 1,219.9 Financial Position Borrowings 1400 60 67.87 1200 67.20 50 The financial position of the Group continues to be strong. The Gross debts of the Group as at December 31, 2004 comprised 1000 40 change in financial position between the two years reflect the of a five-year 3 per cent fixed rate medium term note amounting 769.7 65.29 800 64.60 Group s efforts in divesting its non-core assets and investing in 30 to $150 million. After deducting cash and cash equivalent of Net Asset Value and its core business of ship and rig repair, building and conversion. $470 million, the Group is in a net cash position of $320 million. Assets 600 66.46 20 642.2 Net Tangible Assets Per65.65 Share Acquisition of additional 5 per cent in Jurong Clavon Group s 400 10 business and capital expenditure in operational assets mainly 88.1 Financial Resources 200 23.9 460.0 65.5264.41 0 for increasing our steel production capability to support our core 633.3 172.3 203.9 67.5 0 marine business. The Group also divested its non-core investment The Group maintains sufficient cash and cash equivalent, internal 92.8 71.8 in Chenab (NOL) bond. 101.8 58.7 generated cash flow and the availability of funding resources 447.9 452.7 63.7563.72 2004 through an adequate amount of committed credit facilities. A 609.4 Working capital of the Group increased in line with the higher mixture of short-term money market borrowings and medium 168.3 2004 activities of the core business. Total assets of the Group increased 2003 term loans was obtained to fund working capital requirement, 99.0 22 per cent from $1.53 billion to $1.86 billion. 104.6 2003 capital expenditure and investments. Due to the dynamic nature 429.9 of the business, the Group maintains flexibility in funding by 126.1 2002 Capital Employed 99.5 ensuring that ample working capital lines are available at any 80.6 2002 412.0 one time. 2001 Total capital employed as at December 31, 2004 was $1.0 billion $’m 2001 comprising shareholders funds of $969 million and minority 2000 interests of $34 million. The Group shareholders fund increased 1200 by 4 per cent 2000 Net Asset Value $m 1000 Current Assets Net Tangible Assets Minority interests of the Group were increased from $15 million 90 33.8 800 Other Long Term Assets to $34 million in 2004. This was principally due to new equity 10.02 586.5 80 shares issued to the minority interest of Kristiansand Drilling Pte Other Investments 70 600 205.0 Ltd, our 82 per cent subsidiary company that owns the 14.7 Associated Companies & JVs first Baker Marine Pacific Class 375 Deep Drilling 548.4 Fixed Assets 60 Offshore Jack-up Rig. 400 50 9.9010.3 8.41 651.7 541.5 Shareholders Fund 40 200 239.6 10.0 30 % 9.10 517.3 52.1 0 20 531.2 12 236.7 142.8 Liabilities - Total Liabilities 10.9 10 495.2 9.07 46.1 10 257.0 142.0 0 2004 492.1
8 263.3 57.0 141.4 2003 446.9 6 2004 254.7 140.6 2002 58.2 4 2003 369.0 139.5 2001 2 2002
2000 0 2001 Issued Capital
Capital and Foreign Currency Translation Reserves 2000 Retained Profits Minority Interest Current Liabilities Return on Equity Long Term Liabilitirs
52 53 SembCorp Marine Ltd • Annual Report 2004 Financial
Review LEVERAGING STRENGTHS. BUILDING SYNERGY.
Value Added Statement & Productivity Ratios Statement of Computation of Economic Value Added
2000 2001 2002 2003 2004 2004 2003 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000
Turnover 763,008 854,461 1,011,512 1,067,986 1,362,764 Net Profit Before Tax 100,731 87,183 Less : Bought In Materials (529,161) (594,907) (731,489) (802,765) (1,062,339) Adjust for: Share of Results of Associated Companies’ and Joint Ventures 13,278 8,003 Gross Value Added From Operation 233,847 259,554 280,023 265,221 300,425 Interest Expense 6,871 5,350 Investment, Interest & Other Income 42,872 40,031 54,604 38,936 49,654 Others (7,653) (841) Share of Assoc Companies Results (7,162) (1,707) 5,819 7,930 12,208 Share of Joint Ventures Results 371 (30) 243 73 1,070 Adjusted Profit Before Interest and Tax 113,227 99,695 Other Non-operating Expenses (578) (4,049) (21,490) (5,327) (14,307) Cash Operating Taxes (Note 1) (18,775) (13,569) 269,350 293,799 319,199 306,833 349,050 Distribution NOPAT 94,452 86,126 To Employees : Salaries, Wages & Benefits 135,518 151,822 157,048 165,360 180,833 To Government : Income & Other Taxes 25,042 27,090 27,418 21,836 21,844 Average Capital Employed (Note 2) 1,300,373 1,182,964 To Providers of Capital : Weighted Average Cost of Capital (Note 3) 6.2% 5.4% Interest Paid on Borrowings 1,329 291 822 2,663 2,822 Dividends 62,364 60,356 71,470 71,842 56,881 Capital Charge 80,623 63,880 Retained in Business : Depreciation and Amortisation 27,280 29,117 33,462 35,294 37,497 Group EVA 13,829 22,246 Retained Profits 17,414 22,389 20,627 6,699 38,121 Minority Interests (4,820) (1,892) 1,110 (316) 3,017 Less: Minority Share of EVA 1,201 (1,055) Non-production Costs 5,223 4,626 7,242 3,455 8,035 Group EVA Attributable to Ordinary Shareholders 12,628 23,301 Total Distribution 269,350 293,799 319,199 306,833 349,050 Average Number of Employees 4,774 4,737 5,272 5,302 5,572 Unusual Items (UI) Gains (Note 4) 434 3,913
PRODUCTIVITY RATIOS Group EVA Attributable to Shareholders (exclude UI) 12,194 19,388 Value Added Per Employee 48.98 54.79 53.12 50.02 53.92 Employment Cost Per Employee 28.39 32.05 29.79 31.19 32.45 Value Added Per Employment Costs 1.73 1.71 1.78 1.60 1.66 Note 1 : The reported current tax is adjusted for the statutory tax impact of interest expense (@22%). Value Added Per Dollar Investment in Fixed Assets 0.57 0.60 0.63 0.59 0.65 Value Added Per Dollar Turnover 0.31 0.30 0.28 0.25 0.22 Note 2: Monthly average total assets less non-interest bearing liabilities plus timing provision, goodwill amortised, and present value of operating leases. $m 200 Note 3: The Weighted Average Cost of Capital is calculated in accordance with SembCorp Industries Ltd Group EVA Policy as follows: 1.8 180 i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 6.0% (2003: 6.0%) 1.6 160 180.8 ii) Risk-free rate of 3.78% (2003: 2.78%) based on yield-to-maturity of Singapore Government 10 years Bonds; 1.66 1.4 53.9 140 iii) Ungeared beta 0.5 (2003: 0.5) based on SembCorp Industries risk categorisation; and 1.2 120 iv) Cost of Debt rate at 3.70% (2003: 2.68%) using 5-year Singapore Dollar Swap Offered rate plus 75 basis point. (2003: 5-year Singapore 165.4 1.60 1.0 100 Dollar Swap Offered rate plus 75 basis point) 0.8 80 1.78 50.0 60 0.65 0.6 53.1 40 Note 4: Unusual Items (UI) refer to divestment of subsidiary, associated companies and joint ventures, long-term investments and disposal of major Productivity Ratios 0.4 157.1 59.7 fixed assets. 1.71 20 54.8 0.2 Distribution of Value Added 74.5 21.8 0.22 0 0.59 0 151.8 1.73 $’000 0.25 72.3 21.8 0.63 60 49.0 2004 2004 135.5 27.4 0.28 50 60.6 0.60 2003 2003 40 0.30 27.1 63.7 0.57 30 2002 2002 0.31 25.0 20 2001 2001 10
2000 2000 0 Distribution to Employee Value Added Distribution to Providers of Capital 54 Per $ Employment Costs 55 Distribution to Government Per $ Investment in Fixed Assets Value Added Per Employee Per $ Turnover SembCorp Marine Ltd • Annual Report 2004 Financial
Review LEVERAGING STRENGTHS. BUILDING SYNERGY.
Risk Management Sensitivity Analysis
1. Operational Risk 4. Interest Rate Risk 7. Liquidity Risk 1. Interest Rate
The Group operates in 10 countries with assets and activities The Group s policy is to maintain an efficient optimal interest cost To manage liquidity risks the Group monitors its net operating The Group s cash and cash equivalents are largely invested in spreading across Asia Pacific and Brazil. As part of the Group s structure using a mix of fixed and variable rate debts where cash flow, maintains a level of cash and cash equivalents and fixed deposits. Movement in interest rates will have significant plan to grow its business internationally, the Group will continue working capital is financed by variable rate loans while long term secured committed funding facilities from financial institutions. impacts on the interest and investment income for the Group. to focus on increasing its operating activities and presence in investments are financed by fixed rate loans. Surplus funds are In assessing the adequacy of these facilities, management Based on the cash and cash equivalents of the Group of $469 Brazil, Greater China and Middle East. placed with reputable banks. reviews working capital requirements so as to mitigate the million at end of 2004, a one percentage point movement in the effects of fluctuations in cash flows. Short term funding is effective fixed deposit interest rate is estimated to result in an The Group expects that as part of its business strategy, the The Group obtained additional funding through bank borrowings obtained from overdraft facilities and bank loans. annual $4.69 million change in interest income for the Group. percentage of its overseas sourced assets and customers will and leasing arrangements. The Group s policy is to obtain the increase moving forward, thereby achieving the effect of greater most favourable interest rate available without increasing its During the year, the Group established a $500 million 2. Gross Profit Margin geographical diversification. Likewise, a broader base of major foreign currency exposure. During the year, the Group issued a Multicurrency Multi-issue Debt Issuance Programme. The net customers will reduce the risk of customer concentration. $150 million 5-year fixed rate notes at an interest rate of 3 per proceeds arising from the issue of Notes under this programme Based on FY 2004 turnover of $1.36 billion, a one percentage cent per annum for the purpose of refinancing existing short term will be used for the purpose of refinancing existing short term point movement in the gross profit margin of the Group will lead borrowings and financing working capital requirement of the 2. Investment Risk borrowings and financing working capital requirement of the to a $13.6 million change in gross profit for the Group. There Group. Group. are many different programmes undertaken across the Group The Group seeks to grow its businesses through three fronts: to smoothen out specific project fluctuations. ¥ organic growth of its existing capabilities; 5. Foreign Exchange Risk 8. Credit Risk ¥ development of new capabilities, as well as 3. Others ¥ acquisition of business entities or operating assets The Group incurs foreign exchange risk on purchases that are The Group has no significant concentration of credit risk with denominated in various currencies other than Singapore dollars, any single counter party and monitors its exposure to credit Other risk factors that will have an impact on turnover and net Investment activities, ranging from identification of targets to the primarily the US dollar and Japanese Yen. To minimize exposure risks arising from sales to customers on an on-going basis profits tends to be sector specific, hence it is not practical to conduct of due diligence exercise, are supported by a dedicated on foreign currency risks, the Group usually arrange for natural where credit evaluations are done on customers that require perform sensitivity analysis in such an instance. team of experienced managers and augmented by external hedging by matching costs in the same currency as sales credit. The Group only deals with pre-approved counterparties professionals for specialized services. The business proposals collections. with good credit rating and imposes a cap on the amount to are guided by a given set of internal investment criteria, evaluated be transacted with any counterparty so as to reduce the Accounting Policies by senior management before seeking final Board of Directors 6. Derivative Financial Instrument Risk concentration of risk. approval. The Group significant accounting policies are presented in Note Cash term, advance payment and letters of credit or bank The Group also utilizes forward exchange contracts with maturities 2 in the Notes to the Financial Statements (pages 141 to 147). 3. Treasury & Financial Risk guarantees are required for customers of lower credit standing. of less than twelve months to hedge foreign currency denominated The Group has applied the same accounting policies and financial assets, liabilities and firm commitments. Under this methods of computation in the financial statements for the The Group has in place an established treasury policy and arrangement, increases or decreases in the Group s foreign current reporting year compared with the audited financial guidelines for managing treasury and financial risks. The treasury currency denominated financial assets, liabilities and firm statements as at 31 December 2003, except for the early policy seeks to optimize the Group s cost of capital, minimize commitments partially offset gains and losses on the hedging adoption, with effect from FY 2004, of the following new and the adverse effects of fluctuations in currency and interest rates instruments. The Group only uses foreign currency forward revised Singapore Financial Reporting Standards (FRS) issued on income and ensure sufficient funds are available to meet contracts for hedging purposes. in July 2004 by the Council on Corporate Disclosure and financial obligations and operational needs. Governance (CCDG): The Group s treasury activities are centrally managed in Singapore. FRS 103 Business Combinations As a policy, the Group does not undertake speculative positions Revised FRS 36 Impairment of Assets for trading purposes. Revised FRS 38 Intangible Assets
The financial statement were prepared in accordance with the Singapore Financial Reporting Standards as required by the Companies Act.
56 57 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
specialised contractors, classification societies, marine Global Economy Annual Growth in Real GDP The Marine Industry support companies and labour suppliers. The global economic growth of 5.0 per cent in 2004 was 2003 2004 2005(E) Like the Singapore economy, the marine industry was Over the years, the marine industry had gradually evolved the highest in 30 years, the result of a strong growth in USA 3.0 4.4 3.6 also grew strongly in 2004 as against 2003. from a largely ship repair and shipbuilding centre into a world- industrial countries and an exceptionally rapid expansion Japan 2.5 2.9 1.1 class industry providing high value-added products and in merging markets, notably China. The expansion was EU 1.1 2.3 2.0 One-stop Maritime Hub services like specialised ship repairs, conversions of tankers strongest in the first half of the year and eased gradually Developing countries 6.1 6.6 5.9 to FPSO platforms, rig building and offshore engineering. in the second half. Looking ahead, the global economy Africa 4.3 4.5 5.4 Singapore continued to be a leading one-stop maritime In 2003, the marine industry in Singapore achieved a turnover would seem to be somewhat weaker with further oil-price China 9.3 9.4 8.2 hub, having emerged over the past four decades as the of $3.8 billion, with $2,293 million (or 60.5 per cent) from ship volatility of particular concern. India 8.2 6.2 6.6 world s premier ship repair, ship conversion and offshore repair and conversion, $724 million (19.1 per cent) from Other Asia 5.0 5.5 5.2 centre. The island nation was home to the world s busiest shipbuilding and $775 million (20.4 per cent) from the offshore Consensus forecasts indicated a global economic growth Middle East & Turkey 6.0 5.1 4.8 port in terms of shipping tonnage, the world s second- sector. Preliminary estimates from EDB estimated revenue of 4.2 per cent in 2005, a slowing down over 2004 s L. America 1.8 4.6 3.6 busiest transshipment port (80 per cent of container traffic showed an increase at $5.0 billion for 2004. performance affecting all regions. The strongest impact C. and E. Europe 4.5 5.9 4.8 in Singapore was for transshipment), the worlds top bunkering would be felt in Japan, which achieved a high growth of Russia 7.3 7.3 6.6 port, a key shipbuilding and repair centre, a single most Continuous Supply of Engineering & 3.9 per cent in 2004 slowing down to 1.5 per cent in 2005. World 3.9 5.0 4.3 important jack-up rig construction and floating production Productive Work Force In USA, growth was predicted to be 3.5 per cent in 2005, storage offloading (FPSO) conversion centre. It was also Source : Consensus Forecasts and IMF down from 4.4 per cent in 2004. The Chinese growth home to the seventh-largest merchant fleet in the world. The increase in the volume of activities in the industry rate was also expected to decline from 9.3 to 8.0 per The maritime centre contributed an estimated 6 per cent to also saw a corresponding increase in the number of The Singapore Economy cent. In the European Union, only a moderate decline Singapore s GDP and employed more than 50,000 workers. people employed in the marine industry. The talent pool was expected, from an already modest 2004 level. and the retention of skills across the various disciplines The Singapore economy rebounded by 8.4 per cent in The three main sectors in Singapore s marine industry in engineering and production continued to enhance 2004, after a SARS-afflicted 2003 when growth struggled Oil prices rose 35 per cent from 2003 to 2004. were ship repair and conversion, shipbuilding and the Singapore s reputation in delivering projects successfully. to hit 1.4 per cent. In the final quarter of 2004, growth Several macro-economic models concluded that a $10 offshore engineering sectors. The supporting sectors Many companies thus stepped up their recruitment efforts was revised upwards to 6.5 per cent from the advanced oil price increase would reduce global economic growth were marine equipment manufacturers, suppliers and during the year to augment existing manpower to work estimate of 5.4 per cent due to the better-than-expected by some 0.6 per cent. stockists of marine-related products and services, on new projects secured. The total manpower in the performance by the biomedical cluster in December. marine industry stood at 34,977 in 2003 and in 2004, Economic growth momentum in the fourth quarter also The Singapore Marine Industry Revenue, 1981-2004 it increased by 8% to 37,716. improved as real GDP expanded by 7.9 per cent on an ($ million) Main Indicators of the Singapore Economy annualised quarter-on-quarter basis. 5.0 b 5000 Percentage Change Over Corresponding Period of Previous Year 4.4 b 4500 4.0 b Sector 2003 2004 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 4Q 04 3.8 b 4000 3500 Total 1.4 8.4 1.3 -3.8 2.4 5.6 7.9 12.3 7.2 6.5 3.1 b Manufacturing 2.7 13.9 5.7 -6.0 3.1 8.7 10.2 20.1 11.2 14.1 2.4 b 3000 Construction -9.5 -6.5 -16.5 -9.4 -6.6 -5.1 1.0 -6.4 -11.4 -8.4 2500 Wholesale & Retail 6.7 14.6 5.5 0.6 8.5 12.1 13.7 19.0 15.6 10.7 2000 Hotels & Restaurants -9.9 12.4 -4.5 -29.0 -6.2 -0.5 3.5 40.3 9.2 4.6 1500 Transport & Communications -1.8 9.1 1.3 -10.3 -1.6 3.5 3.7 18.4 9.0 6.3 1000 Financial Services 4.3 6.0 -6.8 5.8 8.0 10.8 16.7 5.2 2.9 0.4 500 Business Services -1.5 2.2 -1.3 -3.2 0.8 -0.7 2.2 3.0 1.4 2.3 0 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04*
Source: Singapore Department of Statistics Ship Repair & Conversion Offshore Shipbuilding * EDB Source: Association of Marine Industries 58 59 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
Marine Industry Employment 1990 - 2004 SembCorp Marine : in 2004. Rig building sector accounted for $118.2 million (No. of persons) of our total revenue, a decline of 12.6 per cent from $135.2 million in 2003. Other businesses comprising bulk 40,000 Sectorial Performance volume purchases recorded an increase of 3.7 per cent 37,447 37,716 38,000 36,000 from $89.0 million in 2003 to $92.3 million in 2004. 34,871 34,977 Like the marine industry in Singapore, SembCorp Marine s 34,000 revenue was derived from four main sectors, namely ship 32,000 Sector FY2004 FY2003 Change 31,810 30,716 repair, shipbuilding, ship conversion and offshore and rig 30,067 30,000 S$m S$m % building. A leader in marine engineering, we had an 27,719 27,360 28,000 26,933 27,262 26,940 Ship Repair 456.2 345.5 32.0 26,393 established global presence with 11 strategically located 25,622 26,000 Shipbuilding 81.1 107.3 (24.4) shipyards in Brazil, China, Indonesia and Singapore. With 23,581 24,000 Ship Conversion/ 22,000 a combined docking capacity of 2.3 million dead weight Offshore 615.0 391.0 57.3 20,000 tones (dwt), we also maintained the largest ship repair, Rig Building 118.2 135.2 (12.6) 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04* offshore and marine-related facilities east of the Suez. Others 92.3 89.0 3.7 * estimated Source: Ministry of Manpower Total 1,362.8 1,068.0 27.6 SembCorp Marine s revenue increased from $1.068 billion Comprehensive Health, Safety, Security & to $1.363 billion in 2004, marking an increase of 27.6 Environment System (HSSE) surpassed the targets set for the industry by the Advisory per cent. For the year, our ship repair revenue increased Committee on Occupational Safety and Health in the 32 per cent from $345.5 million to $456.2 million in 2004. Ship Conversion/Offshore The comprehensive Health, Safety, Security and Environment shipbuilding and ship-repairing industry. In 2003, the Shipbuilding revenue, however, declined 24.4 per cent (HSSE) management system had become a competitive industry reported an Accident Frequency Rate of 3.4 and from $107.3 million to $81.1 million in 2004. The ship registered strongest growth at advantage for Singapore against other low-cost centres in Accident Severity Rate of 453. The Accident Frequency conversion and offshore sector saw a significant increase 57% as compared with 2003 the region. Singapore s marine industry made significant Rate and Accident Severity Rate for 2004 stood at 2.97 of 57.3 per cent from $391.0 million to $615.0 million safety improvement over the last 12 years. The Accident and 830 respectively. Health, safety, security and the Frequency Rate and Accident Severity Rate in 2002 environment would continue to be key areas of focus for the marine industry in Singapore. Turnover by Segments Turnover by Segments Accident Frequency & Severity Rates 1991 - 2004
No. of Accidents Per Million No. of Man-days Lost Per Man-hours Worked Million Man-hours Worked 37% 16 2400 45% 2004 2003 14 14.2 2,174 2100 13.2 10% 1,898 12.5 12 1,958 1800 6% 1,765 10 9.6 1500 13% 8.8 33% 32% 8 7.9 1200 9% 7.3 6 6.1 830 900 707 940 5.1 724 7% 8% 840 4 3.8 600 Ship Conversion/Offshore Ship Conversion/Offshore 708 680 4.1 3.1 453 552 2 2.97 300 Ship Repair Ship Repair 394 3.4 2003 2004 Others Others 0 0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Rig Building Rig Building Shipbuilding Shipbuilding Source: Ministry of Manpower Frequency Rates Severity Rates
60 61 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
SembCorp Marine : Ship Repair Sector Strategic Alliance with Customer Strong growth attributable to Your Effective 1989 1998 1999 2000 2002 2003 2004 By sector contributions, ship repair accounted for 33 per our ability to secure some high ChevronTexaco Shipping cent of our total revenue in 2004, at $456.2 million. Kumiai Senpaku The ship repair sector had rebounded strongly by 32.0 value FPSO upgrading and NOL Shipping per cent, boosted by increased volume and higher-value bottom-damaged repair jobs P.T. Humpuss Intermoda repairs, particularly for repairs on bulk carriers, Shell International (UK) LNG tankers and upgrading of FPSO. Strong freight rates in 2003. Bulk carriers accounted for 24 per cent of ship BP Shipping (UK) across the vessel type further fuelled migration of vessels repair followed by container vessels at 8 per cent and BHP Billiton to Singapore as reliable and quick turnaround time had gas tankers at 8 per cent. Navy vessels accounted for JO Tankers become a more critical factor. 3 per cent, dredgers at 3 per cent, cargo vessels at 2 TESMA (Norway) Alaska Tanker Co (USA) per cent and others at 6 per cent. The number of vessels repaired in 2004 declined from V Ships (Monaco) Taiwan Marine Transport 341 to 313 in 2004. However, the value per vessel We maintained our efforts to foster strategic alliances increased from $1.01 million to $1.46 million in 2004. TECTO B. V. (Belgium) with our customers. Our long-term strategic alliances with North West Shelf customers continued to provide us with the baseload (Australia) Description FY2004 FY2003 % Change order book, which saw an increase from 20 per cent of Revenue total ship repair revenue in 2003 to 29 per cent in 2004. contributions ($m) 456.2 345.5 32 No. of vessels 313 341 (8) Type FY2004 FY2003 This trend would continue into the future as evidenced Apart from the baseload orderbook these customers by the signing of Favoured Customer Contracts with provided, our partnerships enabled both the ship owner Average value Alliance Partners 29% 20% Taiwan Marine Transport, TECTO (Belgium) and North as well as our shipyards to develop and improve on our per vessel ($m) 1.46 1.01 45 Regulars 54% 62% West Shelf in Australia. systems and cost structures, and helped us to serve our Sub-total 83% 82% By vessel types, tanker repairs — the mainstay in our ship customers better. Others 17% 18% repair sector and FPSO upgrading accounted for 46 per Other existing exclusive alliance partners maintained Grand Total 100% 100% cent in 2004 as compared with 50 per cent for tankers by Jurong Shipyard and Sembawang Shipyard Market Outlook for Ship Repair Sector included ChevronTexaco Shipping in USA, Kumiai The year 2004 would most likely be remembered for decades Sempaku in Japan, NOL Shipping in Singapore, as the most profitable year for shipowners. For the second Vessel Types 8% Vessel Types P.T. Humpuss Intermoda in Indonesia, Shell Shipping consecutive year, sharp upturns were recorded in almost and BP Shipping in UK, Jo Tankers, V Ships and Alaska all market segments, in utilisation rates, freight rates, 15% 2004 Tanker Co. newbuilding prices and secondhand prices. 2003 37% 3% 50% 24% 6%
4%
8% 7% 9% Tanker 3% Tanker 10% 2% 6% 5% Container 3% Container 2004 2003 Bulk Carrier Navy Bulk Carrier Cargo LPG/LNG Others LPG/LNG Navy Cargo Dredger Others FPSO Passenger Upgrading
62 63 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
Competitive Challenges SembCorp Marine : Shipbuilding Sector On-going projects from 2004 to 2005 Singapore Shipyards as Niche Players The ship repair industry in Singapore was expected to Despite their smaller sizes compared to their North Asian remain competitive, with external competition coming Shipbuilding contributed $81.1 million or 6 per cent of Project Delivery counterparts, shipbuilding yards in Singapore enjoyed a Name/Type Customer Schedule from lower-cost shipyards around the region to challenge our total revenue in 2004, a decline of 24.4 per cent from position as niche players. They engaged mainly in the the industry with increased ship repair capacities, lower $107.3 million in 2003. A total of three vessels were 2 units building of customised and specialised vessels such as 3,200 hp tugs Pacific Workboats 1Q 2005 prices and improved quality and capabilities. Together delivered in 2004. This comprised one unit of the fast barges, tugs, supply vessels, pleasure craft and yachts, 2 units 2,600 2Q & 3Q with the strong freight rates experienced by tankers, bulk boat for DML Overseas, two units of 3,200 hp tugs for TEU container Wan Hai Lines 2005 with fewer container ships, offshore supply vessels, cable- carriers and container vessels in 2004, the ship repair Pacific Workboats and the second unit of the 2,500 TEU 2 units 2,600 4Q 2005 & laying ships and tankers. Demand for new builds of offshore market is expected to remain strong for 2005. container vessel, Theodor Storm, to German shipping TEU container Wan Hai Lines 2Q 2006 supply vessels would thus be expected to stay strong due company, Reederei Karl Schl ter. 2 units 2,600 1Q & 3Q to the ageing fleet. Demand for feeder container vessels TEU container Reederei F Laeisz 2006 Phase-out Rules by IMO would also remain strong. The filling up of North Asian Description FY2004 FY2003 % Change 2 units 2,646 2Q & 3Q Despite the strong freight rates enjoyed by shipowners, TEU container Wan Hai Lines 2007 shipyards order books until 2007 would be expected to classification societies responsible for marine safety would No. of vessels 4(3)* 4(3)* - 2 units 4,950 benefit Singapore yards which could offer shorter lead times. not allow indefinite deferment of repairs. This, together delivered dwt tanker Kuwait Oil Tanker 2Q 2006 with regulatory requirements by the International Maritime No. of vessels (WIP) 12 4 200 ¥ Shipbuilding supported by strong Organisation when the phase-out rules kicked in for Percentage Market Outlook for the Shipbuilding Sector completion ($m) 81 107 (24) vessels above 25 years to be phased out by April 2005, Record high earnings led to strong ordering activity in freight rates would bode well for ship repair yards in the longer term. ( ) * Fast Boats/tugs WIP - Work-in-Progress the shipbuilding industry in 2004. The year in review was ¥ Continual demand for niche a record year for shipyards with orders exceeding their Strong Shipping Markets Work-in-progress for shipbuilding from 2004 carried best expectations. World Shipbuilding Output would be market in feeder container vessels Increasing pressure on older tonnage would generally forward to 2005 comprised two units of 3,200 hp tugs expected to climb to a new record level of 68.5 million & offshore supply vessels herald increased scrapping levels, but the current strong for Pacific Workboats and four units of 2,600 TEU container compensated gross tons (cgt), an increase of 3 million shipping markets seemed to encourage owners of older vessels for Wan Hai Lines. cgt from the previous year. ships to pay out for the costs of docking and passing special surveys. As with the tanker fleet, the older bulk Order Book carriers were coming under greater scrutiny. But if the SembCorp Marine had been focusing on marketing its market held at its current rates for the coming year, repair own proprietary design in container ship, in particular the yards could look forward to more work on older vessels. 2,600 TEU series of container vessels. In 2004, we secured shipbuilding contracts worth a total of $335 million. This comprised two contracts for the design and construction of two units of 2,646 TEU container vessels for Wan Hai Lines with deliveries scheduled from the second quarter to third quarter of 2007. The contract with Reederei F Laeisz called for the construction of two units of 2,600 TEU container vessels with deliveries scheduled from the first quarter to third quarter of 2006. Another contract secured in December 2004 involved the construction of two units of 4,950 dwt tankers for Kuwait Tanker Company with deliveries in the second quarter of 2006.
Shipbuilding activities will increase in 2005 & 2006
64 65 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
SembCorp Marine : On-going projects carried over from 2004 to 2005 included: On-going projects carried forward from 2004 to 2005 and Ship Conversion and Offshore Sector new projects secured in 2004 and 2005 (as at March 12, 2005) ¥ Conversion of the Erha FPSO from Bouygues Offshore Project Name Type Customer Delivery Schedule Our ship conversion and offshore sector accounted for SA for Esso Exploration and Production Nigeria. The project Erha FPSO Topsides installation and commissioning Bouygues Offshore for 1Q 2005 $615.0 million or 45 per cent of our total revenue in 2004. involved a partnership between Sembawang Shipyard and Esso Exploration & Production A total of six projects were completed during the year. We Sembawang Marine Offshore and Engineering, a division Modec Venture 11 FPSO conversion Modec 1Q 2005 delivered the Jascon 5, a Dynamic Positioning Class 3 pipe- of SembCorp Utilities. Sembawang Shipyard would P-50 Topsides integration & commissioning Petrobras Netherlands BV 2Q 2005 lay/construction barge to owner Consolidated Projects. We undertake installation and commissioning. The topside P-54 Marine conversion Petrobras Netherlands BV 1Q 2006 also completed the marine conversion on Petrobras 50 in facilities would have a total weight of 22,000 metric tons P-54 Topsides fabrication Petrobras Netherlands BV 2Q 2006 Singapore for Petrobras Netherlands BV. Other projects with processing facilities capable of an initial production P-54 Compressor Modules Petrobras Netherlands BV 2Q 2006 P-54 Integration & Commissioning Petrobras Netherlands BV 2Q 2007 completed during the year included FSO conversion on capacity of 165,000 barrels of oil per day. Delivery was CNOOC 114 for International Andromeda, LPG conversion ConocoPhillips Topsides integration & commissioning ConocoPhillips China 2Q 2007 scheduled for the first quarter of 2005. Topsides JV with SMOE on Berge Sisar for Bergesen Offshore, FPSO conversion on SapuraCrest Project Heavy Lift Derrick Pipelay vessel SapuraCrest Petroleum 4Q 2006 TT Nina for Modec International and Sendje Berge FPSO ¥ Topside modules integration and commissioning works Atlantia project Fabrication of new deep Atlantia Offshore 1Q 2006 for Bergesen Offshore. on the P-50. Work commenced in Ma a Jurong in Brazil. draft semi-submersible hull The project was scheduled for completion in the second Stronger conversion/offshore due to quarter of 2005. completion scheduled in the first quarter of 2006. delivery in the fourth quarter of 2006, would be executed major progressive completion of Integration and commissioning of the topsides and on a 50:50 partnership˚ with Huisman. P-50 FPSO marine conversion project ¥ Conversion of M. T. Fairway, a 149,685 dwt VLCC to an compressor modules on the P-54 were scheduled for ˚ completion in the second quarter of 2007. The completed ¥ Jurong Shipyard secured a US$50 million contract from & P-50 Topside fabrication in 2H 2004 FPSO (to be renamed Modec Venture 11) at Jurong Shipyard. The FPSO Modec Venture 11, scheduled for delivery in first P-54 FPSO would be expected to operate for 25 years Houston-based Atlantia Offshore for the fabrication of quarter 2005 would have a processing capacity of 100,000 without drydocking in the Roncador Field, Campos Basin, Atlantia’s new deep draft semi-submersible hull design Description FY2004 FY2003 % Change barrels of oil per day and storage capacity of 930,000 offshore Brazil. for the Independence Hub gas-processing platform in the No. of vessels barrels of oil per day. Scheduled for completion in January ultra deep waters of the Gulf of Mexico. The semi- completed 6 7 (14) 2005, the FPSO would be deployed at Santos Mutineer- ¥ Fabrication and integration of topsides for a new build submersible hull, measuring 232 feet in length and width No. of vessels (WIP) 5 5 - Exeter field development, off Western Australia. floating production storage offloading (FPSO) vessel for and 160 feet in height will be built by Jurong Shipyard Percentage a major oil development in Bohai Bay for ConocoPhillips under a very fast track schedule that entailed some 10,000 completion ($m) 615 391 57 Order Books China Inc. Estimated at more than US$200 million, the metric tonnes of steel fabrication, installation of large marine WIP - Work-in-Progress FPSO conversion and offshore contracts that were secured project undertaken by Sembawang Shipyard in partnership systems, hull electrical and instrument equipment, systems Projects Completed & Delivered in FY2004 in the second half of 2004 and as at March 2005 were: with SMOE Pte Ltd, the offshore engineering unit of fabrication and erection of hull marine piping systems. SembCorp Industries was scheduled for completion in Work commenced in February 2005 with delivery scheduled Project Name Type Customer ¥ Conversion of the VLCC Bar o De Mau into an FPSO mid-2008. Both partners would execute the project under in the first quarter of 2006. Jascon 5 Dynamic Positioning a 50:50 joint venture arrangement. ˚ Class 3 P-54 for Petrobras Netherlands BV. The US$628 million Total order book for ship conversion and offshore as at Pipe-lay/ Consolidated FPSO EPC (Engineering, Procurement and Construction) Construction Barge Projects turnkey conversion project entailed converting the 280,000 ¥ Sembawang Shipyard in partnership with Huisman December 31, 2004 stood at $1.212 billion exclusive of the P-50 Marine Conversion Petrobras dwt VLCC Bar o De Mau to an FPSO to be renamed Special Lifting Equipment B.V. secured a US$150 million new contracts secured in 2005. Netherland BV contract from SapuraCrest Petroleum Berhad, Malaysia Petrobras 54. To be completed in 38 months, the P-54 Market Outlook for the Ship Conversion & CNOOC 114 FSO Conversion International to design and construct a self-propelled DP2 Heavylift FPSO EPC conversion turnkey project would be undertaken Offshore Sector Andromeda Derrick Pipelay Vessel. The contract required the complete by Jurong Shipyard and Mau Jurong in Brazil. Work in The fundamentals driving the floating-production sector remained Berge Sisar LPG Conversion Bergesen engineering, construction, outfitting and commissioning Offshore the FPSO conversion commenced in August 2004 with positive. With global demand for oil continuing to grow at an of a 8,000T new-built hull into a self-propelled DP2 TT Nina FPSO Conversion Modec the marine conversion scheduled for completion in the first exceptionally strong pace, the price of crude had soared over International heavylift pipelay vessel with a 330-men accommodation, quarter of 2005. Concurrently, Mau Jurong would fabricate the past several months while natural gas prices had remained Sendje Berge FPSO Conversion Bergesen and equipped with a Huisman 3000 st heavy lift crane the topside and compressor modules in Brazil with strong and exploration and productivity continued to grow. Offshore and a S-lay pipelay system. The vessel, scheduled for 66 67 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
Global oil demand growing at a fast pace an increase of 47 per cent over current oil consumption. To hot on the heels of a 20.5 per cent increase in 2004. However, Southeast Asia is second with six floaters, followed by Australia An IEA report expected global oil demand to increase 3.4 per meet this demand, 25 years from now, the world would need it could be expected to be even higher if oil and gas prices with five floaters, Brazil with four floaters, Northern Europe cent from 79.7 mb/d in 2003 to 82.4 mb/d in 2004. Continued to be producing an additional 39 mb/d of oil. Natural gas stayed near current levels, according to an industry survey with three floaters, the Gulf of Mexico with two floaters and growth was expected in 2005 but at a lower rate of 1.7 per consumption was also projected to double by 2030. Satisfying conducted by investment bank Lehman Brothers. China and Venezuela with one floater each. cent as a result of the high oil prices. Driving the increase in this growth in oil and gas demand would be a formidable demand for oil was the strong economic growth in China and challenge — one that would create opportunities for the offshore Floating Production Units Planned or Under Study In terms of projects in the longer-term planning stage, India. Consumption of oil in China grew 11 per cent in 2003, sector, including opportunities for floating-production systems. There are now 168 floating production systems in operation the Gulf of Mexico and West Africa are tied for first place with 14.6 per cent in 2004 and an expected 5.6 per cent in 2005. or available worldwide. FPSO vessels comprise about 60 14 floaters each, Southeast Asia in third place with nine floaters, Strong Oil and Gas Prices percent of this total, production semis 23 percent, tension followed by Brazil with eight, Australia with six, Northern Europe The long-term outlook was very bullish. According to the IEA, Another contributing factor to the strong fundamentals was leg platforms 11 percent and production spars 7 percent. with three, and Canada and China with one each. primary world energy demand was projected to increase 59 the continued strength of the oil and gas prices. The number of production units in operation has more than per cent over the next 25 years and 85 per cent of the The price of WTI crude had soared above US$50 per barrel. tripled over the past ten years. Another 79 floating storage increased demand will be satisfied by fossil fuels. The agency These figures are a far cry from the prices that existed a year vessels (without production capability) are now operating, expected global demand for oil to grow to 121 mb/d by 2030, ago. Various industry experts have been recently attempting four of which are used for LPG storage. Projects currently their prognosis of whether these high crude prices are a short in the bidding, design or planning stage would generate a Global Oil Demand (Millions of b/d) term aberration or are here to stay. One group of forecasters requirement for 85 additional production floaters. who are said to have correctly predicted the oil bust of the 86 + 1.7% 1980s are quoted as saying they believe history will not repeat West Africa is the leading area, with an identified potential + 3.4% 83.8 84 itself, at least not for now. They say no bust this time and requirement for 22 production floaters. The Gulf of Mexico 82.4 82 are projecting prices to remain at least above $35 per barrel, is in second place, with a potential requirement for 16 + 2.3% with one of the three predicting crude will first get to $70. production floaters. In third place is Southeast Asia with 14 79.7 80 Another industry analyst believes high oil prices are inevitable potential floaters, followed by Brazil with 12 floaters, Australia 77.9 78 76.8 for the rest of the decade. He sees WTI crude settling in the with 11 floaters, Europe six floaters, China two floaters and 76.2 75.4 76 range of $49 to $54 per barrel by 2010. Canada and Venezuela with one unit each. Of the total floaters, 74 30 are currently in the bidding or final design stage, 55 are
72 Rising Exploration & Production Spending in the longer-term planning stage. Worldwide exploration and production spending would 70 99 00 01 02 03 04 05 continue to rise in 2005, fuelled by record earnings from high In terms of near-term projects in bidding or final design, West Source: IEA, Oil Market Report oil and gas prices. Spending would be expected to climb 5.7 Africa is the clear leader, with eight floaters at this stage. per cent from $167.3 billion in 2004 to $176.8 billion in 2005, Worldwide Exploration & Production Spending Floating Production Systems are Planned or Under Study as at November 2004 Million USD No. of units 200 24 22 180 20 160 6 18 140 16 1 120 14 100 5 12 8 10 80 12 5 8 60 6 40 10 10 4 4 20 7 6 4 2 2 0 2 1 1 1 0 US Canada International Total Gulf of Mexico W. Africa SE Asia Brazil Australia N.Europe China Canada Other
2002 2003 2004E 2005E Source: Lehman Brothers E & P Spending Survey <3000’ water depth Deepwater 3000’ - 5000’ Ultra-Deepwater >5000’ Source: International Marine Associates, Inc. 68 69 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
SembCorp Marine : Rig Building Sector Projects carried forward from 2004 to 2005 included the ¥ Construction of a Baker Marine Pacific Class 375 deep- Market Outlook for the Rig Sector following: drilling offshore jack-up rig for Deep Drilling Invest, The prospects for rig-building and related services The rig building sector contributed $118.2 million or 9 a wholly owned subsidiary of Sinvest ASA of Norway. remain positive. Offshore exploration and production per cent of our total revenue in 2004. We delivered one ¥ Construction of two units of Friede & Goldman ExD- PPL Shipyard secured the US$119.6 million in February had been moving towards deeper waters and deeper unit of jack-up, the Constellation II under PPL Shipyard designed deepwater semi-submersible drilling rigs for 2005. Construction of the jack-up rig would be expected reservoirs that would require a new generation of (associated company previously) to GlobalSantaFe in the GlobalSantaFe International, the largest drilling to commence in the second quarter of 2005 with delivery deep-well drilling rigs to replace existing ageing first half of 2004. contractor in the world. These two units of dynamic scheduled in the second quarter of 2007. drilling fleet. The current fleet of drilling rigs had been positioning semi-submersibles, currently under rapidly ageing, with most jack-ups now at 21 years old Description FY2004 FY2003 % Change construction in Jurong Shipyard, would be capable of ¥ Construction of a Baker Marine Pacific Class 375 deep- and semi-submersibles at 20 years old. The order No. of Rigs drilling at 7,500 feet of water. The two units would be drilling offshore jack-up rig for Wilsuperior Ltd, a subsidiary book for newbuildings stood at 20 units at the start of delivered 1(1) 1(1) - due for delivery in the first quarter of 2005. of Awilco offshore ASA. PPL Shipyard secured the 2005, of which 18 were jack-ups and two were semi- No. of Rigs (WIP) 5(2) 3(1) 67 US $121 million contract in March 2005 with construction submersibles for the competitive market. New jack-ups Percentage Order Book commencing in third quarter 2005 and delivery scheduled would certainly be needed not only to replace an ageing completion ($m) 118 135 (13) Since the launch of the Baker Marine Pacific Class 375 in the second quarter of 2007. fleet, but to meet the increasing demands for more WIP - Work-in-Progress jack-up rig design in January 2004, we secured a total powerful and automated equipment that would reduce ( ) PPL Shipyard of six new orders for jack-ups: Order book for the rig building sector as at December 31, costs and improve safety. In addition, existing fleet Completed in FY2004 2004 stood at $589 million, excluding new contracts secured would require repairs and upgrading. Project Name Type Customer ¥ Construction of one unit of Baker Marine Pacific Class in 2005. 375 deep-drilling offshore jack-up for Kristiansand Constellation II* Jack-up GlobalSantaFe Drilling in PPL Shipyard. Work commenced in the Project Name/Type Customer Delivery Schedule * PPL Shipyard second quarter of 2004 with delivery scheduled in the Development Driller I GlobalSantaFe 1Q 2005 second quarter of 2006. Development Driller II - option 2 :expiry mid-05 GlobalSantaFe 1Q 2005 1st unit Jack-up Kristiansand Drilling 2Q 2006 ¥ Construction of a Baker Marine Pacific Class 375 jack- 2nd unit Jack-up Wilpower, subsidiary of Awilco Offshore ASA 1Q 2007 up rig for Mosbarron, a subsidiary of Awilco Offshore ASA 3rd unit Jack-up Petrojack AS 2Q 2007 of Norway, Work on the new US$117.6 million rig 4th unit Jack-up Apexindo 1Q 2007 commenced in PPL Shipyard in the third quarter of 2004 5th unit Jack-up Deep Drilling Invest 2Q 2007 with delivery scheduled in the first quarter of 2007. th 6 unit Jack-up Wilsuperior, subsidiary of Awilco Offshore ASA 2Q 2007
¥ Construction of a Baker Marine Pacific Class 375 deep- Rig Fleet by Year of Building (as at March 12, 2005)
drilling offshore jack-up rig for Petrojack AS Norway. After No. of units
the US$131 million contract was signed in December 90
2004, work commenced in the first quarter of 2005 with 80 delivery scheduled in the second quarter of 2007. Petrojack 70 AS also had options to build two more similar jack-ups. 60
50 ¥ Construction of a Baker Marine Pacific Class 375 deep- 40 drilling offshore jack-up rig for PT Apexindo Pratama 30 Duta Tbk, the largest Indonesian oil & gas drilling company. 20 The US$133.7 million was secured in February 2005. Construction of the jack-up would be expected to 10 commence in the first quarter of 2005 with delivery 0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 scheduled in January 2007. Source: Rigzone
70 71 SembCorp Marine Ltd • Annual Report 2004 Market Review
& Outlook LEVERAGING STRENGTHS. BUILDING SYNERGY.
Contracts Secured in 2005 (as at March 12, 2005)
Month Value Details (S$m) January $217 1 unit Baker Marine Pacific Class 375 Jack-up rig for PT Apexindo February $161 Fabrication & integration of topsides for new build FPSO for ConocoPhillips China $123 Design and construction of a Self-Propelled DP2 Heavy Lift Derrick Pipelay vessel for SapuraCrest Petroleum Berhad $ 82 Fabrication of a deep draft semi-submersible hull for Atlantia Offshore $194 1 unit Baker Marine Pacific Class 375 Jack-up rig for Deep Drilling Invest March $196 1 unit Baker Marine Pacific Class 375 Jack-up rig for Wilsuperior, a subsidiary of Awilco Offshore ASA
Summary of Shipbuilding, Ship Conversion, Rig Building and Offshore Projects Schedule (exclusive of ship repair & options) 2005 2006 2007 2008 SembCorp Marine : Total Order Book as at December 31, 2004 Shipbuilding (exclusive of ship repair) 1st unit 2,600 TEU container (Wan Hai Lines) Summary of Order Book Sector Contract Value ($m) Balance 2nd unit 2,600 TEU container (Wan Hai Lines) Shipbuilding 555 487 3rd unit 2,600 TEU container (Wan Hai Lines) Record contracts secured in 2004 Ship Conversion 1,982 1,212 4th unit 2,600 TEU container (Wan Hai Lines) and Offshore New contracts secured by SembCorp Marine in 2004 were th Rig Building 589 589 5 unit 2,646 TEU container (Wan Hai Lines) at a record high at $2.1 billion with deliveries and completion th Total 3,126 2,288 6 unit 2,646 TEU container (Wan Hai Lines) from 2005 to 2007. The order book as at December 31, 1st unit 2,600 TEU container (Reederei F Laeisz) 2004 for shipbuilding, ship conversion and rig building stood 2nd unit 2,600 TEU container (Reederei F Laeisz) at $2.3 billion as compared with $1.1 billion as at December Contracts Secured in 2004 1st unit 4,950 dwt tanker (Kuwait Tanker) 31, 2003. nd Month Value Details 2 unit 4,950 dwt tanker (Kuwait Tanker) Based on the new contracts secured and the scheduled (S$m) Ship Conversion & Offshore completion of projects, SembCorp Marine expects a higher December $143 2 units 2,646 TEU container ships P-54 marine conversion for Wan Hai Lines operating profit in 2005. P-54 Topside Fabrication $52 2 units 4,950 dwt tankers for Summary of Contracts Secured Kuwait Oil Tanker Co SAK P-54 Compressor Modules (2000 to 2004 & March 2005) $215 1 unit Baker Pacific Class 375 P-54 Integration & Commisioning S$’000 Jack-up Rig for 2200 Petrojack AS of Norway ConocoPhillips Topsides 2000 November $140 2 units 2,600 TEU container ships Heavy Lift Derrick Pipelay Vessel 1800 for Reederei F. Laeisz of Germany Atlantia Project 1600 June $1,068 P-54 FPSO EPC Turnkey 1400 conversion project for Petrobras Rig Building 1200 Netherlands BV 1st Jack-up (Kristiansand Drilling) 1000 May $193 1 unit Baker Pacific Class 375 2nd Jack-up (Wilpower) 800 Jack-up Rig for Mosbarron Ltd rd 600 January $186 1 unit Baker Pacific Class 3 Jack-up (Petrojack) 400 375 Jack-up Rig for 4th Jack-up (Apexindo) Kristiansand Drilling Pte Ltd 200 5th Jack-up (Deep Drilling Invest) 0 Jan-Jun $58 Others-CNOOC114, 00 01 02 03 04 05 Berge Sisar, Yoyo LPG 6th Jack-up (Wilsuperior) Conversion/offshore Rig Building Shipbuilding 72 73 SembCorp Marine Ltd • Annual Report 2004 Growing Our
Marine Business LEVERAGING STRENGTHS. BUILDING SYNERGY.
CORPORATE VISION While we continue to focus on strengthening our home- In this latest development, SembCorp Marine signed an Complementary Overseas Facilities based shipyards on delivering consistently superb quality agreement with China Ocean Shipping Co. (COSCO) and timely delivery, we are mindful of the need to grow to acquire a 30 per cent equity stake in the enlarged The acquisition of a 35 per cent stake in Mau Jurong in We aim to be the world leader in ship repair, our business globally. Our global hub strategy in the capital of Cosco Shipyard Group in July 2004. The Cosco 2001 has since added a strategic overseas hub with facilities ship conversion and offshore engineering, three strategic locations of Singapore, China and Brazil Shipyard Group is one of the country s leading ship that complement those of our Singapore shipyards. This was providing innovative solutions that exceed thus provides our global clients the value-added, integrated repair and conversion players, with five major shipyards in recently demonstrated in Jurong Shipyards ability to combine its immense experience in floating production storage offloading customers expectations. While anchoring and customised services through complementary facilities the key coastal cities of Dalian in the north, Nantong, and capabilities within the Group and in the international Shanghai and Zhoushan in the centre, and Guangzhou in (FPSO) conversions with the complementary overseas facilities ourselves for future growth and global network of facilities within the hub. the south. With their strategic locations, these shipyards in Brazil to execute the P-43 and P-50 FPSO conversion expansion, we continue to commit ourselves effectively provide ship owners with a network of marine projects. to fulfilling the changing needs and Partnership in Growth engineering services across the entire length of China s The P-43 arrived at Mau Jurong in Brazil in the third aspirations of our employees. coast. Three of the shipyards — Dalian, Nantong and Having held a 20 per cent stake in Cosco Dalian Guangzhou — are already among the top ten largest ship quarter of 2003 for topsides integration and commissioning in China since 2001, we further strengthened our repair yards in China. after its successful marine hull conversion operation at foothold in the important and fast-growing China market Jurong Shipyard in Singapore. Due to the smooth progress with a new deal that would allow us to establish our Taking a stake in the enlarged Cosco Shipyard Group made at both Jurong Shipyard and Mau Jurong, which also presence in the strategic locations along the entire length thus placed us in good stead to partake in the fastest fabricated the topsides production modules, the entire of China s coast. growing marine industry of China. It also allowed us to conversion operation was completed on schedule to the build our presence across China at strategic points along customer s satisfaction. Upon delivery, the P-43 attained its the entire length of China s coast within the shortest first significant milestone on December 21, 2004 when it period. The Shanghai port has consistently been ranked achieved first oil at the Barracuda fields in the Campos Basin third in the world with 14.6 million TEU in 2004, 11.28 offshore Brazil. million TEU in 2003 and 10.61 million TEU in 2002. Other growing ports include the Shenzhen port in the south, Similarly, the marine hull conversion for the P-50 FPSO was Cosco (Dalian) Shipyard with 13.7 million TEU in 2004 and 10.61 million TEU in completed at Jurong Shipyard in Singapore in June 2004 ¥ 3 docks and arrived in Mau Jurong in Brazil in September 2004 ¥ 340,000 dwt capacity 2003, as well as the Qingdao and Tianjin ports in the north. In general, the growth in these ports will have a where it would undergo the topsides phase of its conversion, direct influence on the growth in the ship repair market, with delivery scheduled in the third quarter of 2005. which has seen an annual growth of 13 per cent for the Cosco (Nantong) Shipyard last three years. Leveraging such strengths and experiences, Jurong Shipyard ¥ 2 docks ¥ 290,000 dwt capacity was further able to secure a major US$628 million FPSO The partnership will be a win-win situation as both COSCO EPC turnkey conversion contract from Petrobras Netherlands Cosco and SembCorp Marine can leverage each other s strengths BV to convert the VLCC Bar o De Mau into the P-54 FPSO Shipyard Group in June 2004. To be completed in 38 months, this conversion Cosco (Shanghai) Shipyard to grow. It also lays the groundwork for both companies ¥ 1 dock to explore joint investment opportunities outside China turnkey project would again be undertaken by Jurong Shipyard ¥30,000 dwt capacity in the future. and Mau Jurong in Brazil. On completion, the P-54 would be one of the largest converted FPSO units in the world, Similarly, in July 2004, our subsidiary Jurong Clavon capable of full-capacity oil production and treatment at 180,000 bpd, gas compression capability at 6,000,000 m3/d and Cosco (Zhoushan) Shipyard joined forces with Cosco Shipyard Group in forming an ¥ 1 dock associated company to extend and expand its range of water injection capability at 39,000 m3/d. To be installed at ¥ 150,000 dwt capacity support services in the areas of corrosion control water depth of 1,315 meters, the P-54 FPSO is expected to consultancy, staging, copper slag processing and trading, operate for 25 years without any drydocking in the Roncador Cosco (Guangzhou) Shipyard Field, Campos Basin, offshore Brazil. ¥ 1 dock blasting and painting services to the shipyards in China. ¥ 80,000 dwt capacity 74 75 SembCorp Marine Ltd • Annual Report 2004 Growing Our
Marine Business LEVERAGING STRENGTHS. BUILDING SYNERGY.
Leveraging on Complementary Strategic Alliances with Customers Then in August 2004, another long-term Favoured Customer Contract was signed with Tecto Belgium N.V. Overseas Facilities To grow our ship repair business, SembCorp Marine s and Franceship, Belgium. This contract committed the shipyards placed huge emphasis on expanding the retrofitting and drydocking of 60 vessels owned by pool of alliance partners as these provided a Exmar, Bocimar and Euronav — and managed by Tecto stream of resilient and recurring repair work. Our and Franceship — to Sembawang Shipyard for the long-term strategic alliances with customers continued foreseeable future. to provide us with the baseload order book, which in 2004 accounted for 29 per cent of our ship repair revenue. In October, we further secured a long-term ship Together with our regular customers, they accounted for drydocking and refit contract from North West 83 per cent of our total ship repair revenue in 2004. Shelf Shipping Service Company of Australia. Under the contract, North West Shelf Shipping Service Further efforts to foster strategic alliances resulted Company committed the retrofitting and drydocking in the signing of three significant long-term contracts of all liquefied natural gas (LNG) carriers it managed in 2004. In March 2004, we signed a new Favoured to Sembawang Shipyard and Jurong Shipyard for a Customer Contract with Taiwan Marine Transport. five-year term, with an option for extension into an This was Sembawang Shipyard s first such contract evergreen contract. with an Asian company. Under the contact, Taiwan Marine Transport would commit the retrofitting and drydocking This milestone contract was the first time that a of its owned vessels to Sembawang Shipyard for major LNG consortium had committed itself to a the foreseeable future. Currently, Taiwan Marine Transport long-term maintenance and refit contract in the owns 40 ships comprising bulk carriers, VLCCs, car region, reinforcing our Group s leadership position in carriers, ro-ro ships, wood chip carriers and LNG ships. highly specialised LNG refits. At a time when Singapore was preparing itself to be a major hub and player in the LNG sector, the selection of SembCorp Marine as a refit partner was also a great boost to the Singapore marine industry.
The signing of the long-term contract also committed the two partners to cooperating in the area of ship repair and related services with the key objective of achieving short- and long-term mutually compatible goals in health, safety and environment; quality; timely delivery; cost, and technology advancement.
76 77 SembCorp Marine Ltd • Annual Report 2004 Growing Our
Marine Business LEVERAGING STRENGTHS. BUILDING SYNERGY.
Intellectual Properties for Jack-Up Rig in early 2004. The BMC Pacific 375 Proprietary Design in Container Ship Sustainable Growth Deep Drilling Offshore Jack-Up Rig is a proprietary design developed and owned by Baker Marine, ¥ From 830 TEU to 2600 TEU As part of our strategy for sustainable growth, a wholly owned subsidiary of PPL Shipyard. The we constantly seek to move up the technology jack-up rig is equipped with a drilling package that value chain by developing intellectual proprieties in will enable it to drill high pressure and high temperature 830 TEU designs and solutions in container ships and wells at 30,000 feet while operating in 375 feet of water. jack-up rigs. It includes accommodation facilities for 120 men.
The design of the 2,600 TEU container ship is With these innovative features, the company has proprietary to Jurong Shipyard. The shipyard been successful in securing a total of six jack-up rigs. embarked on the design and construction of the It is an endorsement of the confidence that customers series vessels in 1997, starting initially with the 830 have in the design and capability of the BMC Pacific TEU series container vessels. It then built on its 375 design. experience to construct the 1,078 TEU series and 1078 TEU subsequently the 2,500 TEU and 2,600 TEU series. Each of the container vessels will have 400 reefers and with an ability to carry two-tier high cubes in every cargo hold to cope with owner s increasing demands in regional trade routes. The container vessels 2500 TEU are designed to have a high speed of 22.7 knots with high homogeneous container intake of more than 1960 TEU at 14 ton per TEU.
Since the launch of the series container vessels, Jurong Shipyard had delivered four units of the 830 TEU series container ship, six units of the 1,078 TEU containerships and two units of the 2,500 TEU containerships. Similarly, the design of the 2,600 TEU container series was well-received by customers. Currently, the shipyard is building
two units of 2,600 TEU containerships for 2600 TEU Reederei F Laeisz , four units of the 2,600 TEU containerships and two units of 2,646
TEU containerships for Wan Hai Lines. Features LOA : 213.00m LBP : 202.10m Correspondingly in rig building, we started Beam : 32.20m marketing the Baker Marine Pacific Class Depth : 16.50m Service Speed : abt 22.30 kts 375 (BMC Pacific) Deep Drilling Offshore
78 79 SembCorp Marine Ltd • Annual Report 2004 Innovation &
Technology LEVERAGING STRENGTHS. BUILDING SYNERGY.
INNOVATIVENESS in messy coils of wire strewn about the work area. Versatile Flaring Device — The Versatile Flaring operation status changes, network connection or Built with a six-volt, nine-watt florescent tube, the Device improves the pipe flaring process as a more disconnection — to transact date transfer, backup innovation also shines brighter than traditional lamps. effective way to the traditional brazing sleeve and reset. Risk of information loss is minimised with We believe that innovation and method that was prone to overheating and the data being backed-up in SD cards inserted into every creativity are crucial to stay ahead of Invisible Falling Guard — The Invisible Falling formation of air pockets, resulting in leakages and palmOne handheld. the competition and bring about better Guard uses laser equipment instead of a measuring tape sleeve failure. With this portable, lightweight and efficiency in the organisation. We for measurement during cell guides installation versatile segment type flare device, only one end Each employee is issued an RFID pass card containing and container testing. This new method minimises the of the flare joint needs to be brazed, in contrast to personal data and a photograph. The employee only secure industry leadership through risk of falling as workers no longer have to scale two ends of the sleeve joint as in the previous needs to flash the employee cards at the SMART time constant innovative technological and scaffoldings for manual measurements. Readings are method. The usage of this new device has led to Plus for time attendance. By using wi-fi technology instead engineering solutions and encouraging now digitally captured by a laser distance meter, a improved quality, less safety hazards and greater laser receiver and a laser leveling machine, resulting in efficiency. With flaring work completed within a entrepreneurship. greater productivity and accuracy. shorter time frame of about three to five minutes, it has reaped estimated cost savings of around 65.8 As part of our strategy for sustainable growth, Cable Strip-T-Ease — The Cable Strip-T-Ease per cent. This innovation has been tested and we continued to differentiate ourselves in new products, eliminates injuries from stripping cables. It replaces the approved by ABS Class for safe use onboard vessels. innovative processes, better services, superb quality, traditional and more dangerous use of penknives for cable timely delivery as well as new and specialized stripping for glanding and termination jobs. Cable Mobile RFID Solutions for capabilities. This commitment is embodied in our Strip-T-Ease is an easy-to-use tool that is capable of Enhanced Port Security core value of Innovativeness where we believe making both circular and linear cuts in cables of innovation and creativity are crucial to securing diameters ranging from 10 to 50mm. Sembawang Jurong Shipyard deployed more than 60 Tungsten“ C industry leadership. Shipyard has successfully patented the invention, handhelds from palmOne, Inc., combined with which is a two-time gold award winner at the Mobile Radio Frequency Identification (RFID) Solutions Safety Innovation at the Workplace Marine Industry s Loss Control Convention and the in 2004 as part of its effort to improve port security Ministry of Manpower s Safety Innovation Team at the shipyard. This move comes after Jurong Continuous safety improvement and workplace Convention in 2002. Shipyard s two successful implementations of palmOne“ enhancement have become part of the corporate culture handheld solutions — its SMART time system in 2001, at Jurong and Sembawang Shipyards. At the annual Portable Valve Grinding Device — The Portable to keep track of employees and subcontractors entry Safety Innovation Team at Workplace Convention, eight Valve Grinding Device accelerates the valve and exit time at the shipyard; and SMART safe in 2003, of infra-red, SMART time Plus improved data teams of employees, subsidiary personnel and sub- overhauling process. Conventionally, most valves a behaviour-based safety system aimed at enhancing transfer rate by tenfold and also proved to be more contractors participated in contributing the following ideas had to be overhauled by machines in the workshop as workplace safety practices. reliable. Security officers use the Mobile Reader with for improving productivity, safety, health and environment manual filing using grinding paste and sand paper palmOne handheld and SMART check software to at the workplace. was too labourious and time-consuming. However, An enhancement of the existing SMART time system, verify the employee s card before being allowed transporting the valves to the workshop posed the Tungsten C handheld is connected to the card to board a ship. The solution accelerates the personnel 1 Wireless Working Lamp — safety hazards to workers. The new device now reader, replacing the old Palm IIc handheld. validation, tracking and recording process by 4 /2 hours The Wireless Working Lamp is gives workers the flexibility of performing the The system records the date and time of each employee s per day, resulting in manpower savings of about a portable, battery-operated overhauling on the spot, without having to remove the daily attendance by identifying a unique identification $43,200 a year. device that eliminates the need valves from the pipeline. Easy to use and assemble, number on the employee s card. The date from the for wires, extension boxes and this portable device aligns automatically and does handheld is captured and transmitted via the The result for Jurong Shipyard has been improved sockets. It is a safer alternative not require leveling adjustment, resulting in significant shipyard s wi-fi network to the database server. At the port security, enhanced productivity and quality of to the traditional wire-and- reduction of process down-time and substantial back-end, the administrator can programme a complete work, and a reduction of voluminous paperwork. socket lamp, which poses an cost-savings of about 70 per cent. schedule of activities — ranging from time-specific Everyday, Jurong Shipyard has about 6,000 electrocution hazard and results
80 81 SembCorp Marine Ltd • Annual Report 2004 Innovation &
Technology LEVERAGING STRENGTHS. BUILDING SYNERGY.
employees and contract workers entering and exiting Since the official launch of the Alliance Portal with its 65 hectares facility and more than 20 ships STASCo in London in September 2002, the portal has docked at the shipyard at any one time. With such raised the company s service level up several notches. It high human and vehicle traffic, the necessity of a has become an easy access point for key planning strong port security management system is information and progressive reports to be made available imperative especially as Jurong Shipyard has already to the Alliance partners at various stages of the vessel certified International Ship & Port Facility-compliant. refit at the shipyard.
Award-Winning Alliance e-Collaboration Portal Receiving the award is recognition of Sembawang Shipyard s relentless effort to drive its e-Thrust Sembawang Shipyard was awarded the National and to build a Management Information Systems Infocomm Award 2004 for The Most Innovative Use Framework to transform business. More importantly, of Infocomm Technology (Private Sector) in October the award shows that useful innovations can be birthed 2004. The shipyard is the first company in the marine from joint development projects with our customers. industry to win this prestigious bi-annual national accolade that recognises innovative use of information technology Record-Breaking Success by businesses. through Process Innovation
Its winning Alliance e-Collaboration Portal was an Jurong Shipyard achieved yet another record-breaking important tool developed jointly with its alliance partner, feat when it performed the heaviest skidding weight Shell International Trading and Shipping Co Ltd (STASCo), and the fastest rig-mating time in the region with to provide direct communication and information links the Development Driller II, the second newbuild semi- for continual improvement in documenting, trending and submersible owned by GlobalSantaFe Corporation. diagnosis. The portal is a web-based application and provides a comprehensive one-stop location for all The Development Driller II, a Friede and Goldman refit information pertaining to alliance partners. ExD-designed fifth-generation dynamic-positioning deepwater semi-submersible rig, was successfully The active involvement and participation of the alliance assembled by the shipyard within record time. community is crucial to the success of the portal. Key Leveraging the experience and know-how gained from personnel from the shipyard and alliance partners are the first submersible constructed, the shipyard appointed at various points of the refit process to provide increased the total skidding weight to 17,600 tons, the latest updates to this community. Examples of such 600 tons heavier than the previous operation. The 14,600 information include the Project Manager s Office ton upper hull, built on a 3,000 ton skid truss was update of the latest project schedules and planning outfitted with more equipment and installations such as information; the Document Control Centre compilation anchor winches and cement units. Despite the heavier of the refit vessel s Dimension Inspection Charts and load, the skidding was completed an hour ahead of Technical Reports; and the Alliance Stores frequent its earlier record. updates on the movement and arrival of the alliance partners spares housed at the shipyard location. This With the repeat success of its proprietary load-out and information comes together to provide a comprehensive mating-in-dock technique, Jurong Shipyard has positioned one-stop location for all refit information pertaining to the itself as an innovator in the niche building of sophisticated alliance partners. semi-submersible oil rigs.
82 83 SembCorp Marine Ltd • Annual Report 2004 The
People LEVERAGING STRENGTHS. BUILDING SYNERGY.
PEOPLE CENTREDNESS Educational Level Length of Service the needs of Singaporeans with supervisory potential who may not have the requisite training and qualifications 15% for the marine industry. It allows these supervisory We respect and value every individual 40% potentials to develop skills in the company and assist 29% regardless of his or her position in 2004 2004 in boosting our front-line supervisors strength. our organisation. We provide equal 30% 24% opportunities and a conducive environment for employees to attain their full potential. 8% 16% We reward all employees fairly, Degree & above 12% Less than 1 year 16% 8% benchmarking their performance to best Diploma 2% 1 to 3 years GCE "A" Level 4 to 6 years practices. We believe in building a 2004 2004 GCE "O" Level 7 to 9 years learning organisation for our people to Trade Certificate 10 years & above acquire knowledge and skills to achieve Others professionalism.
The SembCorp Marine Group has a strong and competent workforce to stay at the forefront in this competitive industry. Our success rests on the quality and capability of our human Educational Level Length of Service 9% capital. That is why we take great lengths to attract and retain skilled and competent people to join our team. 42% In addition, we constantly upgrade the competence of our 2003 32% 2003 employees as well as embark on a continuous process to 28% 26% source and employ well-trained and competent personnel to drive the Group forward in its mission. As at December 31, 2004, our manpower strength stood at 5,722 employees. Scholarship Programmes 10% To nurture capable young talents for Singapore s marine Manpower 13% 20% Degree & above 11% Less than 1 year industry, SembCorp Marine offered four undergraduate 7% 2% Diploma 1 to 3 years scholarships worth $10,000 each to promising final-year Category No. of Employees Percentage GCE "A" Level 4 to 6 years 2003 2003 Mechanical and Production Engineering students from Management 1,624 28 GCE "O" Level 7 to 9 years Nanyang Technological University. The scholarship Support Staff 424 8 Trade Certificate 10 years & above Production Workers 3,674 64 Others awarded was part of a new Association of Singapore Total 5,722 100 Marine Industries Marine & Offshore Undergraduate Scholarship Programme. work together with the human resource department to Training & Development Employees are evaluated on their core and non-core competencies required for their jobs. An individual training identify training needs and priorities. SembCorp Marine further granted a total of 11 Association of Marine Industries scholarships to engineering students Skills Competency plan will be drawn up to focus on honing their core competencies, ensuring that the competency level is Quality Supervisors from Singapore Polytechnic and Ngee Ann Polytechnic SembCorp Marine has long surpassed the standards of constantly being raised. With greater involvement in this Another initiative to recruit and develop supervisors is the in 2004. Those with outstanding potential were selected providing just basic training. To stay ahead of competition, aspect, staff demonstrated more commitment and TRAC scheme developed in conjunction with the for sponsorship in engineering degree courses at the we concentrate our training programmes on skills motivation towards training and development, as they National Trades Union Congress. The scheme addresses University of Strathcylde in United Kingdom, National competencies training.
84 85 SembCorp Marine Ltd • Annual Report 2004 The
People LEVERAGING STRENGTHS. BUILDING SYNERGY.
skills training in one of the five tracks — marine general Over the years, Jurong Shipyard s management had been Awards for Outstanding Employees welding, marine mechanics, marine pipe fitting, marine actively supporting union activities through monetary and Subcontractors steel fitting and marine electrical technology. contributions and community welfare projects, Employees who contributed to innovation and safety including co-sponsoring of the union s special at the workplace were recognised at the National The programme began with a job fair-cum-selection and welfare fund. The strong synergy was further Day Observance Ceremony held in August 2004. recruitment exercise held at the South West Community demonstrated when the management provided two The Innovation Award went to the Management Development Council. From the 110 people attending the permanent union offices within its premises to give Information Systems and Human Resource departments exercise, 48 candidates were selected for the programme. members easy access. for devising a portable RFID handheld reader to These selected candidates were assigned to the various speed up identity checks for workers entering the shipyards for employment and two months of full-time marine Employee Care shipyard or boarding vessels. This innovative invention University of Singapore and Nanyang Technological trade skills training. Jurong Shipyards first batch of candidates helped to accelerate tracking and recording process University. These bonded scholars would serve their started their eight-week training in June 2004. People-Centred Programmes by 4.5 hours per day, resulting in manpower savings bonds upon graduation of their studies. To develop employees to their full potential, SembCorp of about $43,200 a year. Other awards were also Union Relations Marine organised numerous courses ranging from presented to the top three Safety Innovation Teams The recipients were picked after going through a stringent tradesmen skills-based training to personal enrichment for their innovative inventions during the ceremony. selection and interview process based on academic Union-Management Partnership courses. Beyond professional development, the company excellence and outstanding co-curricular activities record. Our management continued to work in partnership with also encouraged employees to lead healthy and active Long Service Recognition Upon graduation, the students would be required to serve the Union in developing and maintaining harmonious lifestyles through its Workplace Health Programme. For their years of loyal and dedicated service to the bonds in the respective shipyards. industrial relations at all times. With no industrial disputes, This commitment to employees health earned the company, 301 employees were recognised during the SembCorp Marine s yards enjoy good rapport with their company the Singapore Health Award (Gold) in 2004 and Long Service Awards ceremony held in January 2004. In addition to the numerous sponsorships and respective unions to advance employees welfare and Silver for four consecutive years from 2000 to 2003. As a token of appreciation, these employees who have scholarships, SembCorp Marine also participated in the well-being. These close working relationships have allowed served the company for 10, 15, 25, 30, 35 and 40 years Singapore Confederation of Industries scholarship the Group to achieve higher job satisfaction for the union Beyond the organisational level, Jurong Shipyard played received gold coins and varying cash amounts depending programme. This scholarship programme would pay up members and better productivity. an active role in supporting the nation and the community. on their on length of service. to a total of $250,000 for their studies in established To this end, it enthusiastically responded overseas universities. A collective agreement was signed on February 26, 2004 to National Trades Union Congress many to incorporate the Wage Reform recommendations of efforts for job redesign and job matching International Talent the National Wages Council, which involved setting aside to aid the unemployed public, as well as The Group maintained a constant lookout for capable 10 per cent of the wages as the Monthly Variable hosted educational visits for union leaders foreign talent who could add value and contribute their Component. A productivity-related performance reward to update them on developments in expertise to our projects. Our team now includes engineers system also replaced the previous seniority-based shipyard operations. from China, Myanmar, Bulgaria, Malaysia, India, increment system. Bangladesh, Bolivia, Taiwan and Australia. Festivities for Foreign Employees May Day 2004 Gold Award A Lunar New Year luncheon was specially Re-training of Workers for the Marine Industry In recognition of its commitment towards good union- organised for about 300 employees and To encourage more Singaporeans to join the marine industry, management relations and employee welfare, training workers from China. For the Muslim and SembCorp Marine s shipyards participated in the Place n and development, Jurong Shipyard was presented the Indian foreign workforce, the shipyard Train Marine Re-Skilling for Employment Programme, to re- Plaque of Commendation (Gold) awarded by the National also held Deepa-Raya luncheons for train displaced local workers from other industries. Trades Union Congress in April 2004. With a shared vision them. These festive luncheons provided of promoting employee welfare, Jurong Shipyard had an ideal platform for interaction, further Under the programme, jointly initiated by the Association been working closely with the branch union since its reinforcing the relationship between of Singapore Marine Industries and the Workforce inception under the Pioneer Industries Employees Union management, union and the workers. Development Agency, selected candidates would undergo in 1969.
86 87 SembCorp Marine Ltd • Annual Report 2004 Corporate Enhancement
& Community Care LEVERAGING STRENGTHS. BUILDING SYNERGY.
COMMUNITY RESPONSIBILITY international stage during the Posidonia 2004 Asia Pacific Maritime Exhibition 2004 Towards Maritime Excellence : Martech 2004 The Heart of Shipping Exhibition in June 2004 in the Further strengthening industry links and the promotion We view business as being an integral Greek port city of Piraeus. To further maritime excellence in the industry, of the marine industry, SembCorp Marine s group of SembCorp Marine sponsored MARTECH 2004, part of society. We are committed to be This biennial exhibition was one of the largest and shipyards took part in the Asia Pacific Maritime Exhibition a biennial international conference and exhibition a responsible corporate citizen, both most publicised shows in the marine industry. It held at the Singapore Expo. The exhibition, officiated by held at the Singapore Polytechnic in Singapore. Jointly locally and globally contributing to drew a total of 16,400 visitors from diverse sectors Guest-of-Honour Mr Yeo Cheow Tong, Minister for organised by the Maritime and Port Authority of in the shipping industry, including ship owners, ship Transport saw more than 3,800 visitors from the various Singapore and the Singapore Maritime Academy, community improvements, and to create brokers, shipbuilders, equipment and machinery maritime sectors attending. Serving as a platform for MARTECH 2004 themed Towards Maritime Excellence a caring organisation. manufacturers as well as service providers from networking, the event provided the shipyards with the — Challenges on the Horizon sought to promote about 80 countries. The exhibition was officially opportunities to promote their capabilities and network the advancement of maritime education, training, Recognising our responsibilities as a good corporate opened by Greece s Prime Minister Mr Costas with key players in the marine industry. research and development. The event provided ample corporate citizen and to be a truly successful company, Karamanlis and attracted many dignitaries including opportunities for marine industry players such as we have a strong commitment to improving the world European ministers involved in shipping, transportation shipbuilders, ship repairers, ship owners, ship around us. We view business as being an integral part and commercial activities. managers, charterers, underwriters, naval architects and of society and are committed, both locally and globally, maritime professionals to network and build relationships. to contributing to community improvements, and to Our shipyards were part of the 30-member Delegates also benefited from the cross-fertilisation creating a caring organisation. Singapore delegation led by the Maritime and of knowledge and ideas throughout the various Port Authority and coordinated by the Association of conferences held over three days. Industry Promotion Singapore Marine Industries to promote Singapore as a shipping hub of choice. The exhibition provided The Heart of Shipping : Posidonia 2004 Exhibition numerous opportunities for both yards to expand their networks, forge new alliances and cement Jurong Shipyard and Sembawang Shipyard showcased existing ties with partners from Greece and around their globalised marine engineering capabilities on the the world. Oil & Gas Show in Brazil
SembCorp Marine s Jurong Shipyard and Mau Jurong jointly participated at the 12th Rio Oil and Gas Exhibition and Conference held in Rio de Janeiro, Brazil in October 2004 to showcase their offshore capabilities.
88 89 SembCorp Marine Ltd • Annual Report 2004 Corporate Enhancement
& Community Care LEVERAGING STRENGTHS. BUILDING SYNERGY.
FPSO Research Forum Youth Outreach
A leader in floating production storage offloading (FPSO) Choice Engineering @ Careers 2004 Student Visits conversions, Jurong Shipyard shared its offshore conversion insights during an FPSO Research Forum organised by As part of an on-going drive to boost its talent pool, SembCorp Various student groups visited the National University of Singapore Engineering Faculty in Marine took part in Choice Engineering@Careers 2004 Jurong and Sembawang March 2004. The yard presented to the research community Exhibition in March 2004 at the Suntec City Convention Shipyards during the year to be on its experience with the unique and innovative Centre. The exhibition held over four days saw a steady flow exposed to the challenges of the hydroblasting processes that allowed for greater efficiency of visitors who came by to view the exhibits, make enquiries marine industry. Jurong Shipyard and faster delivery schedules. The forum, a bi-yearly event and submit applications. Response to the event was good played host to students from initiated in 1998, aimed to promote knowledge sharing with a total of 1.385 applications received from interested Anderson Secondary School and among those in the marine industry, including oil companies, job-seekers. Pei Cai Secondary School when operators, contractors, yards, research and academic they visited and toured the institutes and safety authorities. Industry Promotion to Students shipyard.
To draw new blood and generate greater interest A group of Masters Students towards the marine sector, SembCorp Marine from the National University of participated in the marine and offshore industry Singapore s Civil Engineering Department also visited promotion and exhibition at the National University of Jurong shipyard for hands-on and insightful information Community Care Singapore in September 2004. To give the students on the shipyard s offshore conversion capabilities. The a better understanding of the marine industry, visits proved to be a fruitful and eye-opening experience SchoolBAG Scheme SembCorp Marine was represented by Executive for many students, who gained new insights into the Director of Sembawang Shipyard Wong Lee Lin and marine engineering industry and knowledge of the vast As a demonstration of its care and concern for the five other speakers when they spoke on the group s opportunities available in this fast-growing sector. community, SembCorp Marine contributed $152,350 in business operations, the job opportunities and grants to 742 needy students under its SchoolBAG (School sharing their work experiences within the industry to an Book Assistance Grant) scheme in 2004. audience of 200 university, polytechnic and secondary school students. The SchoolBAG scheme is an initiative under SembCorp Marine s Community Responsibility and Care Programme to alleviate the financial burden of low-income households with schooling children. The grants aim to help families Insights on Innovation with a combined income of less than $1,250 to defray the cost of purchasing school text books, uniforms and SembCorp Marine s Jurong Shipyard shared its stationery items at the start of the academic year. distinctive approach to innovation during a Singapore Innovation Award Winners Experience Sharing For the second consecutive year, SembCorp Marine in Session organised by SPRING Singapore in March collaboration with the Ministry of Education identified a 2004. The shipyard, one of the seven organisations on total of 61 schools in close proximity to Jurong Shipyard the sharing panel, had won the Singapore Innovation and Sembawang Shipyard for participation in the of the Year 2003 Award conferred by SPRING programme. The scheme is also open to children of Singapore for its innovative load-out and mating-in-dock employees within the group. rig-building technique.
90 91 SembCorp Marine Ltd • Annual Report 2004 Corporate Enhancement
& Community Care LEVERAGING STRENGTHS. BUILDING SYNERGY.
Promoting the Arts
Brazilian Cheer provided an excellent platform for the strengthening of friendships between staff and their Brazilian counterparts. An active supporter of the arts, SembCorp Marine sponsored Brazilian musician Gilberto Gil s Local Talent Support performance at the Esplanade Concert Hall in 2004. Hailed as an inspiration and legend for his role in To promote Singapore s local talents multi-cultural revolutionising Brazilian music and culture, Gilberto Gil, landscape, we supported the People s Association who is also Brazil s Minister for Culture, delivered his Cultural Talents fund raising gala concert held at signature Brazilian samba, bossa nova and baiao the National University of Singapore Cultural Centre. tunes melded with elements of reggae, rock, funk The support would help local artistes continue to and jazz during the 90-minute concert. Apart from share the rich and special multi-cultural heritage with sharing Brazilian music and culture, the occasion other Singaporeans.
Tsunami Relief Efforts Donation for Safety Milestone Achieved
To help to ease the pain and suffering of tsunami disaster To mark the safety milestone of 500,000 manhours without victims, SembCorp Marine and its subsidiaries translated loss-time injuries for the Mutineer-Exeter development compassion into action by raising $306,530.40 towards FPSO conversion project, Jurong Shipyard together with the tsunami relief efforts. Modec Inc and Santos Ltd made a $5,000 donation to the beneficiaries of METTS Welfare Association in July Responding to the call, employees and subcontractors 2004. from SembCorp Marine s group of shipyards together with the Jurong Shipyard employees union, rallied together Community Chest Awards and donated generously towards the cause. All donations were forwarded to the Red Cross International s Tidal Sembawang Shipyard received the Corporate Bronze Wave Asia Relief Fund. Award and the 5-Year Outstanding SHARE Award from the Community Chest of Singapore in October 2004. The Jurong Shipyard and its subcontractors also extended Corporate Bronze Award was awarded in recognition of help and support to 78 foreign workers whose its contribution of at least $50,000 raised from the various families had been affected by the tsunami in India by activities organised in conjunction with the shipyard s presenting return air tickets, cash allowances and leave celebration of its 35th Anniversary in 2004. The 5-Year of absence. Outstanding SHARE Award was presented to the shipyard in recognition of its sustained participation rate at platinum level for five consecutive years.
92 93 SembCorp Marine Ltd • Annual Report 2004 Health, Safety,
Security & Environment LEVERAGING STRENGTHS. BUILDING SYNERGY.
HEALTH, SAFETY, SECURITY AND employees to exercise regularly and to lead a well-balanced ENVIRONMENT PRESERVATION healthy lifestyle.
We are committed to continuously promote Gold Honours at Singapore HEALTH Awards In October 2004, Jurong Shipyard became one of the a safe and healthy work environment for first shipyards in Singapore to earn Gold honours during our customers, employees, contractors at the HEALTH. (Helping Employees Achieve Lifetime and the community. We take responsibility Health) Awards organised by the Health Promotion Board. for our own safety and of others both on The award gave national recognition to organisations with effective workplace health promotion programmes to and off the job. encourage healthy living and active lifestyles among employees. The shipyard had been a Silver Award recipient Health & Employee Wellness for the past four consecutive years since its participation in the programme in 2000. Adopting a holistic approach towards health promotion, SembCorp Marine s yards initiated a series of programmes Sembawang Shipyard and Jurong SML were both throughout the year, through the company s Workplace accorded the Silver HEALTH Award in 2004 in recognition Health Promotion (WHP) Committee. A series of activities of their health promotion efforts. Both yards had been was aimed at creating awareness and promoting employee consistent in their drives to advocate healthy living among health and wellness - from prevention programmes to employees. Both yards had been receiving the Silver fitness workouts. The Committee aimed to encourage Award consecutively for the past three years. Education & Prevention Workplace Exercise Besides the daily morning exercise, employees also took Weight Management Programme part in a fun-filled boxercise session. Other programmes To help overweight employees fight the bulge and keep healthy, organised included a seven-week workplace yoga for a weight management programme was initiated over a span employees. These programmes offered employees the of four months. The programme was targeted at employees convenience of keeping fit at the workplace and to develop identified with a body mass Index of above 28 during a routine a well-balanced body and mind. health screening exercise conducted in-house by the Medical Centre. Through talks and workshops conducted also by doctors and health professionals from Alexandra Hospital, employees learnt to prepare healthy foods and make lifestyle choices to achieve a fitter and slimmer physique.
94 95 SembCorp Marine Ltd • Annual Report 2004 Health, Safety,
Security & Environment LEVERAGING STRENGTHS. BUILDING SYNERGY.
Fitness Fun at Sentosa Health Screening for Prevention Exercise can be fun, especially when in good company. With employees welfare in mind, a series of health With this message, employees and their families headed screenings were held in Jurong Shipyard in July 2004. down to Sentosa for fitness fun during the launch of the During this annual health exercise, employees had to National Healthy Lifestyle Campaign in September 2004. complete a lifestyle survey and undergo various checks Joining some 12,000 Singaporeans, our participants to determine their blood pressure, body mass index as enjoyed their time of exercise and bonding during the well as glucose and cholesterol levels. In the follow-up 1.8-kilometre walk-a-jog and the 30-minute Get Fit a month later, employees each received a comprehensive Singapore workout. report on the findings, complete with practical advice on improving their current state of health.
Jurong Shipyard also organised a series of chest X-ray screenings in October 2004 in conjunction with the SATA Sporting Highlights at various locations in the shipyard. Employees within the SembCorp Marine group had a rolling good time during a friendly bowling competition organised by the Jurong Shipyard Recreation Club in October 2004. Our employees also joined other companies within the Temasek Group for a marathon run around Bedok Reservoir. By December 2004, teams of employees and subcontractors competed in a soccer friendly match.
Talks & Courses Employees from SembCorp Marine s yards gained insights into health enhancement and disease prevention through various talks and courses organised by subsidiary yards during the year. A First Aid Course and Colorectal Cancer Awareness Talks were organised to equip employees with skills and knowledge for maintaining health and wellness.
TEAMWORK
We are committed to working together and having trust for one another to achieve common organisational goals and results. We believe in promoting closer relationship and developing team spirit among our people to encourage speedy and open communication and to care for each other.
96 97 SembCorp Marine Ltd • Annual Report 2004 Health, Safety,
Security & Environment LEVERAGING STRENGTHS. BUILDING SYNERGY.
Frequency Rates (Jurong Marine Contractors) Frequency Rates (Jurong Shipyard) Safety Per million man-hours Per million man-hours
Safety Practices 5.00 6.00
4.28 5.19 Safety-first at all times continued to be our corporate 5.00 4.00 policy as safety performances were constantly used as a proxy indicator of a shipyard s productivity. The year in 3.20 3.88 4.00 2.99 3.00 2.78 review saw the Group pushing ahead in its efforts to 2.62 3.15 3.20 2.58 2.90 2.99 3.00 ensure safe practices, procedures and equipment, 2.34 2.21 2.70 2.70 2.00 enhancing confidence and work satisfaction among 2.00
employees and subcontractors. 1.00 1.00 Similarly, Sembawang Shipyard, together with the At an operational level, each shipyard was responsible 0.00 0.00 for managing its respective ISO, safety and environmental 97 98 99 00 01 02 03 04 97 98 99 00 01 02 03 04 Singapore Civil Defence Force, also conducted annual issues and initiatives. Fire and Rescue Exercises to ensure a smooth Frequency Rates (Sembawang Shipyard) interface between both critical parties, and to equip all Safety Performance Per million man-hours personnel with the required knowledge and skills to hours worked. However, the Pulau Samulun location handle emergency situations. One such exercise was on The year 2004 saw a total of 106 loss-time injury cases achieved a Frequency Rate of 2.45 in 2004, which was 5.00 board the vessel St Andrews 114 held jointly with owner 4.70 in Jurong Shipyard, a 24.7 per cent increase from 85 in better than the 2.8 target rate was set by the Advisory 4.30 4.30 CNOOC. 4.10 2003. Overall Accident Frequency Rate based on the Committee in Accident Prevention in Shipbuilding & Ship 4.00 recordable cases stood at 3.2 accidents per million man- Repairing Industries by the Ministry of Manpower. Safety Workshops 3.10 2.99 2.90 3.00 Shipyards ISO 14001 ISO 9001 OHSAS 18001 2.47 Safety workshops to unveil our Group Safety Action Plan Certification Certification Certification/Others 2.00 were conducted at group level for senior management Jurong Shipyard - 1995 ABS Quality 2002 ABS Quality staff within our shipyards. Senior management also Evaluation Inc Evaluation Inc 1.00 presented on safe work practices of specific various yard 2003 : Recertification 2003 : Recertification activities, such as hot work and spray painting. Participants 0.00 Sembawang 2002 Det Norske Veritas 1996 Det Norske Veritas International Safety 97 98 99 00 01 02 03 04 also shared best practices in structuring safety and stability Shipyard 2003 : Recertification 2003 : Recertification Rating System during shipbuilding, ship repair, ship conversion and rig by Det Norske Veritas. building operations. 2004 : ISO 14001 2004 Improved from Emergency Response Environment Management ISO9001:2000 Level 8 to Level 9 System recertification Recertification Upholding the motto of Always Ready and on Guard , Jurong Shipyard conducted a total of 35 fire and Jurong SML/SML - 1994 - evacuation drills in 2004 to fine tune its fire-fighting and Shipyard Det Norske Veritas 2003 Recertification evacuation system. Of these, 26 were conducted on board vessels and eight at the workshops and offices. PPL Shipyard - 2004 ABS Quality - One bomb threat evacuation drill was also held during the year to familiarise all direct employees and Jurong Marine 2003* - subcontractors — including ship crew, security guards Contractors - Certification International and utilities personnel - with emergency preparedness * previously ISO 9002: 1994 on board vessels.
98 99 SembCorp Marine Ltd • Annual Report 2004 Health, Safety,
Security & Environment LEVERAGING STRENGTHS. BUILDING SYNERGY.
Red Helmet Programme Security Jurong Police Division Headquarters. The initiative fostered closer cooperation among the shipyards and The Corrective Work Programme, or the Red Helmet International Code for the Security Jurong West NPC in an effort to step up efforts against Programme, was implemented in the shipyard in March of Ships and Port Facilities terrorism and maintain a high level of vigilance. Some of 2004 to educate injured workers on potential safety these measures included joint security patrols by yard hazards. As part of the programme, such workers would Jurong Shipyard, Sembawang Shipyard and Jurong SML personnel and the police as well as more effective and don red helmets and follow a safety supervisor on his received the Provisional Statement of Compliance of a Port efficient information sharing. rounds with the objective of spotting potential hazards. Facility for meeting the IMO s International Code for the Each hazard spotted would earn points and a worker had Security of Ships and Port Facilities between February and to chalk up to 3,000 points before he could resume his March 2004. This achievement was made in advance of normal duties. out, was increased from once every eight hours to once the Maritime Port Authority s April 2004 deadline for every six hours daily. The yard also conducted a training compliance. Portable Gas Detector course to educate employees and subcontractors on the proper use of the portable gas detection equipment. As The Code, which was a new IMO regulation implemented In an effort to enhance confined space safety, an additional precaution against fire and explosion, the to enhance maritime security, recognised the comprehensive Jurong Shipyard purchased 250 sets of portable gas yard also introduced the use of an oxygen short piece in security measures within our group of shipyards. With the detectors for use by various contractors and the sections. July 2004. The oxygen short piece, connecting the hose objective of detecting security threats and taking preventive With more detectors available, the frequency of periodic to the gas manifold outlet, must be disconnected whenever measures against security incidents affecting ships and port gas checking, especially where hot works were carried the working area was left unattended. facilities, the Code required ships crew and ports to train their staff and develop comprehensive audited security plans and procedures to counter security threats. For 2005, a pervasive security presence of the local Police In compliance with the code, our shipyards had put in place Authority on joint patrols together with the shipyard s a comprehensive security plans to enhance the security of security personnel would be implemented. This would the yards. Such intensified security efforts included stringent help to create an efficient and effective information network access control, closer monitoring of port facilities and tighter involving employees and subcontractors. supervision of cargo handling to guard against possible threats to maritime security. Access to shipyards by Surveillance & Enforcement employees and subcontractors was now controlled by photo identification as well as an electronic system that To ensure strict compliance with safety rules and validated workers information. regulations, Jurong Shipyard s safety task force stepped up surveillance with more frequent Shipyard Recognised Date of Award of Security Organisation Certification inspections in 2004 as compared with Jurong SML Control Risk Group February 26, 2004 2003. The yard further refined its behaviour- based safety programme to conduct more SML Shipyard Control Risk Group February 26, 2004 focused observations on particular days Sembawang Shipyard CISCO Singapore February 27, 2004 and times when accidents most frequently Jurong Shipyard CISCO Singapore March 12, 2004 occurred. Plans are currently underway to increase the observer pool from the previous ratio of Shipyard Security Watch Group 1:100 to 1:300.
Jurong Shipyard held the Shipyard Watch Group cum Anti-terrorism seminar in November 2004 at the
100 101 SembCorp Marine Ltd • Annual Report 2004 Health, Safety,
Security & Environment LEVERAGING STRENGTHS. BUILDING SYNERGY.
Environmental Care Sembawang Shipyard developed an extensive waste health hazards, the shipyard conducted dust-mask fit segregation and recycling programme centred on an test training for a total of 910 participants during on-site recycling compound. Its housekeeping the year. The shipyards also carried out regular Student Outreach committee continued to keep waste disposal costs monitoring of noise levels within workshops and low with centralised bays for general waste, empty onboard vessels to ensure that sound levels were Sembawang Shipyard organised a milestone award oil drums and used anodes as well as anti-crow bins to kept within acceptable limits. under its Green Wave Environmental Care Project. promote housekeeping. The yard also adopted a A total of 21 awards were presented to the winning teams more systematic approach including disseminating 5S Housekeeping at the ceremony held in November 2004 graced by bulletins to educate employees on proper disposal Mr Tharman Shanmugaratnam, Minister for Education. and housekeeping practices, conducting regular For better workplace management, Jurong Shipyard zone inspections around the yard and onboard vessels and Sembawang Shipyard continued to adopt the The 1st Prize in the tertiary category is jointly sponsored and implementing a fine chit system to subcontractors 5S Housekeeping approach, a Japanese system by Shell Trading and includes a one-month work with poor housekeeping performances. based on the acronyms: Seri, Seiton, Seiso, Seiketsu attachment to Shell Trading. The 1st Prize in the JT/ITE/CI promoting the innovative use of advanced technologies and Shitsuke (sorting, arranging, cleaning, maintaining category is jointly sponsored by BP Shipping and includes in environmental protection and improvement to students. Environmental Safety and self-discipline). As an incentive for employees and a one-month work attachment to BP Singapore. Winners subcontractors to maintain good housekeeping standards, of the top prizes at the JC/ITE/CI and tertiary levels would Waste Management To educate employees and subcontractors on the 5S Housekeeping Awards were presented to deserving also be offered attachments at Sembawang Shipyard. proper protective measures against environmental sections and stores. JPL Industries, a subsidiary of SembCorp Marine, Launched in January 2003, Sembawang Shipyard s continued to recycle some 300,000 tonnes of copper Filter Cleaner Green Wave Environmental Care Project had been slag every year that would otherwise have to be disposed. This move sought to conserve natural resources and The Filter Cleaner minimises environmental pollution during extend the life of Singapore s only landfill. filter cleaning of the CNC machine s fume extractor by ensuring the proper disposal of ferrous dust. The invention effectively cleans the filters using compressed air while containing ferrous dust, which is discharged via an air relieve outlet to an open water tank. This invention significantly reduces the workers ferrous dust exposure and potential respiratory problems.
102 103 SembCorp Marine Ltd • Annual Report 2004 Spotlight on Activities
within the Group LEVERAGING STRENGTHS. BUILDING SYNERGY.
2004 was a busy and memorable year for the FPSO Modec Venture 11 SembCorp Marine Group of Shipyards. We spotlight FPSO Modec Venture 11, Jurong Shipyard s tenth offshore Venture 11 was officiated by Lady Sponsor Mrs Catherine the main activities within the group. conversion, was officially named on December 9, 2004 Ellice-Flint, wife of Mr John Ellice-Flint, Managing Director A Milestone Achievement in a ceremony held at of Australian oil and gas company Santos Ltd. - Christening of Development Driller II the shipyard. The naming of Modec On delivery, the Modec-operated FPSO will be deployed Jurong Shipyard accomplished a major milestone in rig Among the most technologically advanced drilling to the Mutineer Exeter Fields, about 150km north of building with the fast-track construction of Development rigs in the world, the Friede and Goldman ExD-designed Dampier, Western Australia, for development works, with Driller I and II, the yard s first pair of ultra-deepwater semi- deepwater drilling rigs were engineered to meet the first oil targeted in the first quarter of 2005. Measuring submersible drilling rigs for Global SantaFe Corporation. requirements of drilling in the challenging deepwater arena, 258m x 46m x 23.9m, the FPSO would be moored on with the ability to drill in water depths of up to and beyond site in water depths of 165m to receive oil from each field The rigs accelerated pace of construction was achieved 7,500 feet. Due for delivery in the first quarter of 2005, via a sub-sea production system. Designed with a SOFEC through the yard s breakthrough load-out and mating-in- both rigs will be deployed to the US Gulf of Mexico for internal disconnectable turret, the FPSO is capable of dock technique involving the simultaneous construction exploration and developmental works. Development Driller storing 930,000 barrels of oil and producing 100,000 and subsequent skidding and mating of the upper and I will be on a two-year charter to BHP Billiton Petroleum barrels of oil/day, with provision for gross liquid throughput lower hulls. Through this innovative, world s first technique, (Americas) Inc, while sister rig Development Driller II will of up to 140,000 barrels of liquid/day. the shipyard was able to accelerate the rig building be on a three-year charter to British Petroleum for its process, while meeting high quality and safety standards. Atlantis Field development. FPSO Baobab Ivoirien MV10
Jurong Shipyard witnessed the successful sail-away of The FPSO will be installed in 970m water depth at the FPSO Baobab Ivoirien MV10 (Ex-Nina) on December 13, Baobab Field, making it one of the deepest water FPSOs 2004. This marked the shipyard s nineth offshore delivery in the world. Designed for ease of future in-situ expansion for Modec Group after a smooth 15-month conversion of topside capacity, the FPSO was equipped with an operation. external SOFEC turret mooring system capable of supporting six original risers and four future risers plus The contract to convert the 357,000 dwt ULCC T.T. Nina umbilicals. It has a storage capacity of 2,000,000 into an FPSO, renamed Baobab Ivoirien MV10, was barrels of oil/day and 75 million cubic feet of awarded to Jurong Shipyard by Modec International LLC. natural gas as well as a water injection of Upon its arrival in August 2003, the yard began ship 100,000 bopd. The Baobab Field is conversion, module integration and life extension works, expected to be online in April 2005. comprising the fabrication and installation of helideck, cargo and ballast tank and deck piping system, turret integration and commissioning, 2,000 MT of deck and bottom steel renewal as well as blasting and painting of all cargo oil tanks and water ballast tanks.
With the total commitment on the project teams to safety, health and environment, the shipyard completed the conversion within the scheduled timeframe and achieved a commendable safety performance of three million manhours without loss-time injuries.
104 105 SembCorp Marine Ltd • Annual Report 2004 Spotlight on Activities
within the Group LEVERAGING STRENGTHS. BUILDING SYNERGY.
Theodor Storm Sendje Berge Theodor Storm, a 2,500 TEU containership, was Owned by Bergesen Offshore dy AS, the FPSO extension works to increase the vessel s life for an additional delivered on schedule to owner Reederei Karl Schl ter called at Jurong Shipyard for an upgrading operation to four to eight years without drydocking. in December 2004. It was the second containership enhance its production strength and storage capacity. newbuilding from Jurong Shipyard s latest container Highlights of the upgrading included the installation Measuring 349m x 52m x 27m, the 274,333 dwt Sendje vessel series, following sister ship, Thomas Mann, of an oil fiscal metering module, a cargo tank venting Berge will operate in the Okwori Field in the Gulf of Guinea which was delivered in October 2003. Theodor Storm system, a sub-sea control system, new 7MW offshore Nigeria in water depths of approximately 140m. is a high-performance vessel built according to a Turbogenerator and HV Generator as well as the The upgraded FPSO has a storage capacity of 2,000,000 design developed and owned by Jurong Shipyard. upgrading of its turbine. The operation also encompassed bbl, with a production capacity of 60,000 bopd, an oil Designed with 400 reefer containers, the 213m x the installation, hook-up and interconnection of gas capacity of 38,000 bopd and a gas injection rate of 55 32.2m x 16.5m containership is capable of high compression and gas dehydration modules and life mmscfd. container intake at fast speed, with a total stowage capacity of 2,586 TEU, comprising 1,628 on deck and 958 TEU in the cargo holds.
Offshore Dynamic Positioning Class 3 Pipelay, Construction and Accommodation barge. Jascon 5 was built to American Bureau Shipping Classification rules with notation ABS + A1 Barge + PAS + DPS2 Pipelay . It is operated by Offshore Contractors and owned by the Nigerian based Sea Trucks Group.
Major work carried out by the shipyard included the installation of specialised equipment including the SAS pipe laying equipment, Kongsberg Simrad Dynamic Positioning System, a pipley stinger and A frame. Additionally, the shipyard installed a Huisman heavy lift crane that can revolve with a full load of 800 tonne and a TTS/Norlift 25 tonne capacity pedestal crane that will enable the Jascon 5 Jascon 5 to handle all pipeloading and general duties. Sembawang Shipyard achieved yet another major milestone in the area of offshore conversion when The newly completed Jascon 5 left the shipyard in April it successfully completed the sophisticated conversion 2004 for its first assignment in the Middle East and will of Jascon 5 to a newly outfitted and commissioned be deployed worldwide by the Sea Trucks Group.
106 107 SembCorp Marine Ltd • Annual Report 2004 Contents
General Information 110 Report of the Directors 111 Statement by Directors 131 Auditors’ Report to the Members of SembCorp Marine Ltd 132 Profit and Loss Accounts 133 Balance Sheets 134 Statement of Changes in Equity 136 Consolidated Statement of Cash Flows 138 Notes to the Financial Statements 141 Supplementary Information 180 Major Properties 182 Notice of Annual General Meeting 185 Proxy Form 187 111 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to 7/9/2005 8/8/2008 27/9/2006 7/11/2007 10/8/2009 (Appointed on 15 July 2004) Kwi Kin) (Alternate to Tan Options to subscribe of shares for ordinary $0.10 each - at $0.70 per share 8/9/2001 150,000 75,000 - - - at $0.66 per share 28/9/2002 187,500 125,000 - - - at $0.90 per share 8/11/2003 250,000 250,000 - - - at $0.99 per share 9/8/2004 250,000 250,000 - - - at $1.04 per share 11/8/2005 - 250,000 - - (deceased)
Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD to the members together with audited financial statements of Company and their report present The Directors for the year ended 31 December 2004. Group Directors of the Company are: at the date of this report of the Company in office The names of the Directors Kwi KinTan Pheng Hock Tan Kiyotaka Matsuzawa Low Sin Leng Han Tew Tan Ajaib Haridass President Haruo Kubota Heng Chiang Gnee Arrangements to enable Directors acquire shares and debentures nor at any time during the financial Plans, neither at the end of financial year, Other than the SembCorp Marine Share of the Company to acquire year was the Company a party to any arrangement whose object is enable Directors of the Company or any other body corporate. or debentures benefits by means of the acquisition shares Directors’ interests in shares, share options and debentures to be kept required to the register at the end of financial year had, according who held office The following Directors Temasek of the ultimate holding company, or debentures in shares under Section 164 of the Companies Act, an interest corporations as stated below: Holdings (Private) Limited or any other related Name of Director Kok Siew Wong SembCorp MarineLtd of shares Ordinary - $0.10 each 212,500 350,000 - - and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Chairman (Appointed on 15 July 2004) Kwi Kin) (Alternate to Tan (Resigned on 15 July 2004) (deceased) Tan Kwi KinTan Pheng Hock Tan Kiyotaka Matsuzawa Low Sin Leng Han Tew Tan Ajaib Haridass Haruo Kubota President Heng Chiang Gnee Naoteru Tsuda General Information AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors Kok Siew Wong Secretary Kwong Sook May Registrar Kon Choon Kooi Pte Ltd #06-02 47 Hill Street & Industry Building Chinese Chamber of Commerce 179365 Singapore Registered Office Kling Road 29 Tanjong 628054 Singapore Auditors Ernst & Young Audit Partner 2003) from Daniel Soh (with effect
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 113 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to 5/2/2008 7/1/2005 28/6/2005 15/5/2006 27/2/2007 10/2/2009 23/8/2005 30/6/2006 per share to per share to shares to be delivered shares after 2006 ofConditional award 1,000,000 restrictedshares -fully paid 600,000Options to subscribe (Note 5) shares for ordinary 400,000of $0.25 each - (Note 5) at $2.50375 29/6/2001 - 80,000 - 80,000 - - - at $1.8375- at $2.01 per share 16/5/2002 28/2/2003 120,000 200,000 200,000 30,000 - - - - - at $1.50 per share 6/2/2004 200,000 150,000 - - - at $1.97 per share 11/2/2005 -Options to subscribe shares for ordinary of $0.05 200,000- at $0.55 per share 24/8/2001 100,000 ------at $0.78 per share 30/10/2001 100,000 100,000 - - - at $0.69 per share 28/7/2002 120,000 90,000 - - (deceased)
Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Name of Director Kok Siew Wong SembCorpIndustries Ltd of Conditional award 400,000 performance -SembCorpLogistics Ltd par shares Ordinary value $0.25 each - - 0 to 800,000 (Note 4) - - - 140,000 - - and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Singapore FoodSingapore Industries Limited shares Ordinary of $0.05 each - 180,000 310,000 - - Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to to to 7/5/2012 2/6/2013 19/5/2009 26/6/2010 19/4/2011 17/5/2014 17/10/2012 18/11/2013 22/11/2014 Options to subscribe of shares for ordinary $0.25 each - at $2.26 per share 20/5/2001 500,000 500,000 - - - at $0.98 per share 18/10/2003 400,000- at $1.29 per share 200,000 19/11/2004 400,000 - 400,000 - - - - at $1.99 per share 27/6/2001- at $1.55 per share 500,000 20/4/2002- at $1.59 per share 500,000 500,000 8/5/2003 500,000 400,000- at $1.14 per share - 400,000 3/6/2004 - 400,000 - - at $1.35 per share - 400,000 - 18/5/2005- at $1.52 per share 23/11/2005 - ofConditional award - -300,000 performance to be delivered shares -after 2003 - 400,000 ofConditional award - 400,000 performance 0 to 600,000 400,000 to be delivered shares after 2004 - (Note 1) ofConditional award -400,000 performance - 0 to 800,000 to be delivered shares (Note 1) after 2005 - 0 to 800,000 - (Note 2) - 0 to 800,000 (Note 2) 0 to 800,000 (Note 3) - - - (Note 3) - - - - (deceased)
Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Kok Siew Wong SembCorpIndustries Ltd of shares Ordinary $0.25 each - 836,446 1,341,446 - -
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 115 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to to 7/5/2012 2/6/2013 26/6/2010 19/4/2011 17/5/2014 17/10/2012 18/11/2013 22/11/2014 shares to be delivered shares after 2004 ofConditional award 380,000 performance to be delivered shares after 2005 - ofConditional award 380,000 performance 0 to 760,000 to be delivered shares after 2006 - 0 to 760,000 (Note 3) (Note 3) Options to subscribe - shares for ordinary -of $0.25 each - at $1.99 per share 0 to 760,000 - 27/6/2001 (Note 4) 25,000 - 25,000 - - - - at $1.55 per share 20/4/2002 25,000 25,000 - - - at $1.59 per share 8/5/2003 12,500 12,500 - - - at $0.98 per share 18/10/2003- at $1.14 per share 12,500 3/6/2004 6,250 12,500 12,500 - - - - - at $1.29 per share 19/11/2004- at $1.35 per share 12,500 18/5/2005 12,500 - - 12,500 - - - - at $1.52 per share 23/11/2005 - 12,500 - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Name of Director Kwi Kin Tan SembCorp MarineLtd of Conditional award - 0 to 760,000 380,000 performance 0 to 760,000SembCorp -Industries Ltd (Note 2) shares Ordinary of $0.25 each (Note 2) - - - 6,250 - - and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Singapore FoodSingapore Industries Limited shares Ordinary of $0.05 each - 18,000 18,000 - - Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to 7/1/2005 7/9/2010 8/8/2013 27/9/2011 7/11/2012 10/8/2014 of $0.10 each - at $0.78 per share 9/8/2003 120,000 120,000 - - - at $0.66 per share 28/9/2002 800,000 800,000- at $1.04 per share 11/8/2005 - - - 700,000 - - Options to subscribe shares for ordinary of $0.10 each - at $0.70 per share 8/9/2001 750,000- at $0.90 per share 750,000 8/11/2003- at $0.99 per share 800,000 9/8/2004 800,000 - 800,000 ofConditional award 800,000 - 380,000 performance to be delivered shares -after 2003 - - 0 to 760,000 - (Note 1) - - (Note 1) - - (deceased)
Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Kok Siew Wong FoodSingapore Industries Limited Options to subscribe shares for ordinary SingaporeTechnologiesEngineering Ltd HoldingsRaffles of $0.10 each shares Ordinary Limited shares Ordinary Tele-Singapore communications Ltd of $0.15 each - shares Ordinary Telechoice of $0.32 each -International Limited of $0.02 each Kwi Kin Tan 25,137SembCorp Marine - shares Ordinary Ltd 10,000 shares Ordinary 25,137 10,000 1,880 - - of $0.10 each - 1,746 950,000 - - 1,118,000 1,540 - - 70,000 1,430 - - - -
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 117 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to 7/2/2012 6/2/2013 9/2/2014 10/8/2011 12/8/2012 11/8/2013 10/8/2014 - at $2.68 per share 11/8/2002 227,500 227,500 - - - at $2.29 per share 8/2/2003 175,000 175,000 - - - at $1.92 per share 13/8/2003 175,000 175,000 - - - at $1.79 per share 7/2/2004 200,000 200,000 - - - at $1.86 per share 12/8/2004 200,000 200,000 - - - at $2.09 per share 10/2/2005 - 200,000 - - - at $2.12 per share 11/8/2005 - 200,000 - - Conditional award ofConditional award 150,000 performance to be delivered shares after 2003 - ofConditional award 200,000 performance 0 to 300,000 to be delivered shares after 2004 - (Note 1) ofConditional award 250,000 performance - 0 to 400,000 to be delivered shares (Note 1) after 2005 - 0 to 400,000 (Note 2) ofConditional award 250,000 performance 0 to 500,000 to be delivered shares (Note 2) after 2006 - 0 to 500,000 (Note 3) - - (Note 3) - - - - 0 to 500,000 - (Note 4) - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Name of Director Pheng Hock Tan SingaporeTechnologiesEngineering Ltd - at $2.72 per share 20/2/2002 225,000 225,000 19/2/2011 to - - and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Raffles HoldingsRaffles Limited shares Ordinary TechnologyVertex Fund (II) Ltd shares Ordinary of $0.32 each - of US$1.00 each - 8,000 8,000 - - - - 5 units 5 units Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to to 8/8/2008 7/8/2008 9/2/2009 9/2/2010 27/9/2006 7/11/2007 10/8/2009 10/8/2009 of $0.40 each of $0.10 each - at $0.66 per share 28/9/2002 20,000 20,000 -Options to subscribe shares for ordinary - of $0.10 each - at $1.29 per share 8/8/2000 5,000 5,000 - - - at $1.04 per share 11/8/2005 - 50,000- at $1.418 per share 10/2/2001 -- at $2.00 per share 400,000 11/8/2001 400,000 - 5,000 5,000 - - - - - at $0.90 per share 8/11/2003- at $0.99 per share 40,000 9/8/2004 40,000 50,000 50,000 - - - - - at $2.26 per share 10/2/2002 400,000 400,000 - - Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Tan Pheng Hock Tan SembCorp MarineLtd Options to subscribe shares ordinary for Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Kwi Kin Tan SingaporeTechnologiesEngineering Ltd HoldingsRaffles of $0.10 each shares Ordinary Limited shares Ordinary Tele-Singapore communications Ltd of $0.15 each - shares Ordinary StarHub Ltd of $0.32 each - 17,180 shares Ordinary - 8,000 17,180 - 200 8,000 - 190 - - - 10,000 200 - SingaporeTechnologies 190 Engineering Ltd - of $0.10 each shares Ordinary - - 73,864 73,864 - -
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 119 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of t0 to to to to to to 7/5/2012 2/6/2013 19/4/2011 17/5/2014 17/10/2012 18/11/2013 22/11/2014 Options to subscribe shares for ordinary of $0.25 each - at $1.55 per share 20/4/2002 300,000 300,000 - - - at $1.59 per share 8/5/2003 250,000 250,000 - - - at $0.98 per share 18/10/2003- at $1.14 per share 250,000 3/6/2004 125,000 200,000 150,000 - - - - - at $1.29 per share 19/11/2004- at $1.35 per share 150,000 18/5/2005 112,500 - - 125,000 - - - - at $1.52 per share 23/11/2005 ofConditional award 150,000 performance - to be delivered shares after 2003 - ofConditional award 125,000150,000 performance 0 to 300,000 to be delivered shares after 2004 - (Note 1) ofConditional award 150,000 performance - 0 to 300,000 to be delivered shares - (Note 1) after 2005 - 0 to 300,000 (Note 2) ofConditional award 100,000 performance 0 to 300,000 to be delivered shares - (Note 2) after 2006 - 0 to 300,000 (Note 3) - - (Note 3) - - - - 0 to 200,000 - (Note 4) - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Name of Director Low Sin Leng SembCorpIndustries Ltd shares Ordinary of $0.25 each - 100,000 365,000 - - and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to 8/8/2008 8/8/2008 7/11/2007 10/8/2009 27/9/2011 7/11/2012 10/8/2009 of $0.40 each of $0.10 each - at $0.90 per share 8/11/2003 100,000 100,000 -Options to subscribe shares for ordinary of $0.10 each - - at $0.66 per share 28/9/2002 37,500 12,500 - - - at $1.04 per share 11/8/2005 - 100,000 - - - at $1.04 per share 11/8/2005 - 50,000 - - - at $0.99 per share 9/8/2004 130,000 130,000 - - - at $0.90 per share 8/11/2003- at $0.99 per share 50,000 9/8/2004 25,000 50,000 37,500 - - - - Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest TelechoiceInternational Limited of $0.02 each Kiyotaka Matsuzawa shares Ordinary SembCorp MarineLtd Options to subscribe - shares ordinary for - 30,000 - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Pheng Hock Tan Tele-Singapore communications Ltd of $0.15 each shares Ordinary CharteredSemiconductorManufacturing Ltd of $0.26 each StarHub Ltd - shares Ordinary shares Ordinary 2,020 - - 1,880 7,000 1,740 7,000 - 1,620 32,000 -Low Sin Leng SembCorp MarineLtd shares Ordinary - - - - of $0.10 each 12,500 75,000 - -
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 121 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to 8/8/2008 10/8/2009 10/8/2009 of $0.10 each - at $0.99 per share 9/8/2004 75,000 75,000 - - - at $1.04 per share 11/8/2005 - 150,000of $1.00 each - - of $0.10 each - at $1.04 per share 11/8/2005 - 130,000 - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Name of Director Han Tew Tan SembCorp MarineLtd Options to subscribe shares for ordinary and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest SingaporeTechnologiesEngineering Ltd Chartered of $0.10 each shares Ordinary SemiconductorManufacturing Ltd of $0.26 each CapitaLand Limited shares Ordinary shares - Ordinary AirlinesSingapore Ltd shares Ordinary - - Tele-Singapore communications Ltd - of $0.15 each shares Ordinary AirportSingapore - 13,000 Services LtdTerminal of $0.10 each shares Ordinary of $0.50 each SMRT Corporation - 13,000Ltd - - shares Ordinary 17,000 HoldingsRaffles -Limited 7,000 4,000 17,000 shares Ordinary 2,580 - -Neptune OrientLines Limited 7,000 4,000 of $0.10 each shares Ordinary 3,000Ajaib Haridass of $0.32 each 2,400 4,000 100,000 - -SembCorp Marine of $1.00 each Ltd 3,000 Options to subscribe 4,000 - 25,000 7,740 - 3,300 - 34,000SembCorp 22,468 shares for ordinary Industries Ltd 34,000 1,000 shares Ordinary of $0.25 each 2,468 1,000 - - 1,000 - 1,000 50,000 - 50,000 - - Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to 5/2/2013 7/3/2007 15/5/2011 27/2/2012 10/2/2014 21/2/2008 29/4/2009 Options to subscribe shares for ordinary of $0.25 each - at $1.8375 per share 16/5/2002 40,000 10,000 - - - at $1.55 per share 8/3/2003 5,000 5,000 - - - at $1.97 per share 11/2/2005 - 20,000 -- at $0.86 per share 22/2/2004 - - 5,000 - - - at $2.01 per share 28/2/2003- at $1.50 per share 20,000 6/2/2004 10,000 20,000 15,000 - - - - - at $0.84 per share 30/4/2005 - 5,000 - - Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Low Sin Leng SembCorpLogistics Ltd shares Ordinary of $0.25 each - - 45,000 FoodSingapore Industries Limited shares Ordinary of $0.05 each CapitaLandLimited -Singapore shares Ordinary -ComputerSystems Limited of $1.00 each - of $0.25 each Options to subscribe 20,000 shares for ordinary - 20,000 2,000 AirlinesSingapore Ltd 2,000 - shares Ordinary Tele-Singapore communications Ltd of $0.15 each shares Ordinary - Telechoice - -International Limited of $0.50 each of $0.02 each - shares Ordinary - 3,000 1,740 - 3,000 1,616 4,000 4,000 - 1,740 1,616 9,000 - -
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 123 Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to to to 7/5/2012 2/6/2013 26/6/2010 19/4/2011 17/5/2014 17/10/2012 18/11/2013 22/11/2014 shares to be delivered shares after 2005 ofConditional award 200,000 performance to be delivered shares after 2006 -Options to subscribe for shares ordinary -of $0.25 each - at $1.99 per share 0 to 400,000 27/6/2001 (Note 4) 12,000 - 12,000 - - - - at $1.55 per share 20/4/2002 12,000 12,000 - - - at $1.59 per share 8/5/2003 7,000 7,000 - - - at $0.98 per share 18/10/2003- at $1.14 per share 7,000 3/6/2004 10,000 3,500 7,500 - - - - - at $1.29 per share 19/11/2004- at $1.35 per share 10,000 18/5/2005 7,500 - 10,000 - - - - - at $1.52 per share 23/11/2005 - 10,000 - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Name of Director Heng Chiang Gnee SembCorp MarineLtd of Conditional award - 0 to 400,000 200,000 performance 0 to 400,000SembCorpIndustries Ltd shares Ordinary of $0.25 each - (Note 3) (Note 3) - - - 8,500 12,715 12,715 and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest SembCorpLogistics Ltd FoodSingapore shares Ordinary Industries Limited of $0.25 each shares Ordinary of $0.05 each CharteredSemiconductorManufacturing Ltd - of $0.26 each - shares Ordinary 18,000 - - 18,000 5,000 - - 5,000 10,000 10,000 - - - Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of to to to to to to 7/9/2010 8/8/2013 10/8/2009 27/9/2011 7/11/2012 10/8/2014 of $0.10 each - at $1.04 per share 11/8/2005 -Options to subscribe shares for ordinary 30,000of $0.10 each - at $0.70 per share 8/9/2001 300,000 - 300,000 - - - - at $0.66 per share 28/9/2002 375,000 375,000- at $1.04 per share 11/8/2005 - - - 400,000 - - - at $0.90 per share 8/11/2003- at $0.99 per share 500,000 9/8/2004 500,000 500,000 ofConditional award 500,000200,000 performance to be delivered shares -after 2003 - ofConditional award 200,000 performance - 0 to 400,000 to be delivered shares - after 2004 - (Note 1) - 0 to 400,000 - (Note 1) 0 to 400,000 (Note 2) (Note 2) - - - - # Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Ajaib Haridass CharteredSemiconductorManufacturing Ltd of $0.26 each Tele-Singapore shares Ordinary communications Ltd of $0.15 each shares Ordinary Haruo Kubota SembCorp Marine -Ltd Options to subscribe -Heng Chiang Gnee - shares ordinary for SembCorp Marine 200Ltd shares Ordinary 10,000 190 - 10,000 of $0.10 each 10,000 200 725,000 190 813,000 - - # At date of appointment Director
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 125 Chairman (deceased) Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ contractual benefits fees to a firm in which Mr Ajaib Except as disclosed in Note 4 to the financial statements on payment of professional of the Company no Director financial year, since the end of previous is a member, of the Company, Haridass, a Director corporation of a contract made by the Company or related a benefit by reason or become entitled to receive has received has a substantial or with a company in which the Director is a member, or with a firm of which the Director with the Director, financial interest. Share Plans Plans”) were the “Share Plan and Restricted Stock (collectively, Option Plan, Performance Share Share The Company’s General Meeting of the Company held on 31 May 2000. at an Extraordinary and adopted by the shareholders approved and Compensation Committee (the “Committee”) of the Company has been designated as The Executive Resource Plans. The Committee comprises the following members, all of for the administration of Share Committee responsible directors: whom are Kok Siew Wong Han Tew Tan Ajaib Haridass and employees of the Company its subsidiaries (the “Group”) Option Plan is the incentive scheme for directors The Share aimed primarily at key executives of the Group. Plan and Restricted Stock are the Performance Share whereas and employees of the Group, non executive directors the Company with means whereby Option Plan provides The Share with the their close working relationship and certain categories of persons who can make significant contributions through and and non-executive directors Group Parent and employees of the Company’s such as non-executive directors Group, given an opportunity to participate in the equity of Company. associates, are employees of the Company’s or Associated Group Parent Option Plan, participants who ceased to be employed by the Group, Under the rules of Share age, retirement at or after the legal retirement retirement redundancy, of ill health, injury or disability, Company by reason by the Committee, may be allowed Committee age, death, etc, or any other event approved the legal retirement before comprised in that Option which Options. The Committee may determine the number of Shares their unexercised to retain being a period not later than the expiry of and the period during which such Option shall be exercisable, may be exercised at any time notwithstanding that the date of of that Option. Such Option may be exercised Period in respect the Exercise of such Option. Period in respect of such Option falls on a date prior to the first day Exercise exercise Group. The Company designates SembCorp Industries Limited as the Parent to participants achieve pre-determined fully-paid shares Plan and Restricted Stock award The Performance Share or to accomplish time-based service of the Company, and enhance economic values for shareholders targets that create or their equivalent cash value combinations to participants as fully-paid shares, will be released conditions. Awards by the Committee. achieved and subject to approval are that the conditions of awards provided free-of-charge thereof, at the end of performance period only when pre- released Plan are granted under the Performance Share Awards no vesting periods beyond the performance achievement periods. are determined targets have been achieved. There granted under the Restricted Stock Plan vest only after satisfactory completion of time-based service conditions, or Awards after a further period of service beyond the performance target completion date. is performance related, the award where of each under the Restricted Plan and length of vesting period in respect No minimum vesting period is prescribed granted under awards from differ awards will be determined on a case-by-case basis. Performance-based restricted award the Performance Plan in that an extended vesting period is imposed beyond performance target completion date. of performance and encourage and incentivise participants to higher standards intended to attract, retain Plans are The Share to past contributions and services; as well dedication and loyalty by enabling the Company to give recognition greater of the Group. motivating participants to contribute the long-term prosperity vement Other shareholdings of the year the year of the year the year At beginning At end of At beginning At end of of $0.40 each the conditional awards has thus lapsed. the conditional awards Kwi Kin and the balance of conditional to Tan awarded were For this period, 167,200 new SembCorp Marine shares has thus lapsed. awards Pheng Hock and the conditional award to Tan was awarded Engineering share Technologies For this period, no new Singapore has thus lapsed. to Low Sin Leng and the balance of conditional awarded were For this period, 52,500 new SembCorp Industries shares has thus lapsed. awards to Heng Chiang Gnee and the balance of conditional awarded were For this period, 88,000 new SembCorp Marine shares has thus lapsed. awards (i)(ii) have been vested on 20 August 2002; 200,000 SembCorp Industries shares (iii) have been vested on 20 August 2003; 200,000 SembCorp Industries shares (iv) have been vested on 20 August 2004; 200,000 SembCorp Industries shares (v) will vest on 20 August 2005; and 200,000 SembCorp Industries shares will vest on 20 August 2006; 200,000 SembCorp Industries shares (a)(b) 2001 to 2003* from Period (c) 2002 to 2004 from Period (d) 2003 to 2005 from Period 2004 to 2006 from Period (deceased) pursuant to the SembCorp Industries Restricted Stock Plan subject to completion of the vesting period referred to (deceased) pursuant to the SembCorp Industries Restricted Stock Plan subject completion of vesting period referred at the time of Kok Siew (deceased) continuing to be in the employment of SembCorp Industries Group below and Wong vesting. Of the 1,000,000 SembCorp Industries Shares: by the Executive 16 February 2005 as approved from vested with effect stocks are restricted options and remaining All share and Compensation Committee. Resource of target below 80% level will mean no performance shares will be delivered, while achievement up to 200% will mean twice will be delivered, of target below 80% level will mean no performance shares could be delivered. awarded the number of conditional performance shares * Kok Siew (deceased) and the balance of to Wong awarded were For this period, 105,000 new SembCorp Industries shares Name of Director and Corporation in heldwhich interest Description of interests Exercise in registered Shareholdings is in which the Director period in the name of Director deemed to have an interest 2:Note Kok Siew stocks granted to Wong of restricted comprised in conditional award are 1,000,000 SembCorp Industries shares Singapore Tele-Singapore communications Ltd of $0.15 each shares Ordinary Neptune OrientLines Limited shares Ordinary - of $1.00 each - 200 - 190 - - 15,000 - - Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Directors’ interests in shares, share options and debentures (cont’d) Heng Chiang Gnee HoldingsRaffles Limited shares Ordinary ComputerSingapore shares Ordinary Systems LimitedStarHub Ltd of $0.25 each of $0.32 each - - shares Ordinary 6,000 3,000 -Note 1: Achie will depend on the achievement of set targets over a 3 year period as indicated below. The actual number delivered 6,000 3,000 - - - 7,000 - - - - in shares, at the end of financial year had interests who held office no director Except as disclosed in this report, corporations, either at the beginning of financial or of related options of the Company, warrants or share debentures, or at the end of financial year. or date of appointment, if later, year, in the Company between end of financial year and 21 January 2005. interests no changes in the Directors’ were There
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 127 - 1,120,000 - (820,000) 300,000 250,000 1,300,000 - (350,000) 950,000 Options Aggregate options Aggregate Aggregate Aggregate 16,168,000 96,252,300 (7,050,400) (32,448,750) 56,753,150 granted during options cancelled/lapsed/ options options (deceased) Option period Number of shares price Exercise Fair value of options (both dates inclusive) options granted at date of grant Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD estimated using the Black-Scholes Option- The fair values of options the Company granted at date grant are as follows: pricing model are 11 Aug 2005 to 10 200911 Aug 2005 to 10 2014 since commencement of the Scheme The details of options the Company granted during year and granted/exercised as follows: to 31 December 2004 were 15,538,000 630,000 $1.04 $1.04 $0.11 $0.11 Option participants of the Company Directors Kok Siew Wong Kwi KinTan Pheng HockTan the yearKiyotaka MatsuzawaLow Sin Leng Han Tew Tan grantedAjaib HaridassHaruo Kubota 100,000Heng Chiang Gnee 50,000 700,000 not accepted Kwi Kin) (alternate to Tan 330,000Former directors 4,900,000 exercised 50,000 160,000of the Company 150,000 outstanding 130,000 400,000Other Executives 30,000 200,000Group 225,000 3,000,000 130,000 Group -Parent - - 30,000Non-executive director Group of Parent (1,050,000) - - - - 3,850,000 130,000 14,025,000 - - 153,000 - of the shareholders Option Plan, no options have been granted to the controlling Since the commencement of Share (75,000) 83,304,300 (925,000) of the total Option Plan has been granted 5% or more Company or their associates. No participants under the Share 670,000 330,000 at a discount. options available. No have been offered 160,000 883,000 125,000 2,075,000 - (6,949,400) -The options granted by the Company do not entitle holders of options, virtue such holdings, to any right issue of any other company. participate in any share - (101,000) 225,000 (28,752,000) 130,000 of the Company or its subsidiary companies under options as at no other unissued shares were Save as disclosed, there - 47,602,900 end of the financial year. 30,000 (229,250) (247,500) 552,750 422,500 ’000 ’000 ’000 ’000 ’000 ’000 1999 2000 2001 2002 2003 2004 Options Options Options Options Options Options in respect of options granted at the time grant. in respect of the options may be set. options. Further vesting period for the exercise Group. and parent employees of Group (i) price of the options can be set at a discount to market not exceeding 20% The exercise (ii) 12 months after the grant for market price options and 24 discounted The options can be exercised (iii) associates employees and 10 years for the after 5 years for non-executive directors, The options granted expire Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Share Plans (cont’d) Option Plan is as follows: the Share Other information regarding SembCorp Marine Share Option Plan of $0.10 each the details of the options granted under Option Plan on unissued shares At the end of financial year, as follows: Company are SembCorp Marine Ltd of $0.10 each shares Ordinary Date options granted period: Option exercise FromTo 10 Mar 1999Number of holders at 8 Sep 2000 31 December 2004 27 Sep 2001 price per optionExercise 7 Nov 2002 8 Aug 2003 10 Aug 2004 Number of options outstanding: $0.65At 1 January 2004Options exercised 10 Mar 2001 -Options granted 8 Sep 2001 28 Sep 2002 $0.70Options granted 9 Mar 2004 8 Nov 2003 but not accepted 9 Aug 2004 7 Sep 2010 27 Sep 2011Options cancelled 11 Aug 2005 469 $0.66 7 Nov 2012 8 Aug 2013 404At 31 December 2004 10 Aug 2014 (72) $0.90 833 8,523 - (3,003) $0.99 - (332) 1,003 10,218 (2,496) - $1.04 1,025 15,199 - (89) - (1,608) 5,431 15,450 1,149 (170) (378) 7,552 - - - (406) 13,185 - - 14,601 (471) - 15,984 (68) - - 16,168 (116)
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 129 (appointed on 15 September 2004) adoption; and • to the internal and external officers auditors; by the Company’s assistance provided • of the Company for and the Company prior to their submission directors financial statements of the Group • Exchange). person transactions (as defined in Chapter 9 of the Listing Manual Singapore interested Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD 100% of targets achieved, but granted conditionally and representing in awards The total number of performance shares could range of the awards the actual release as at end 2004, was 1,740,000. Based on the multiplying factor, not released to a maximum of 3,480,000 performance shares. zero from $420,000 has provided the Group financial year, during the current with the accounting policy of Group, In accordance date. at reporting based on the market values of shares of performance shares (2003: $831,000) in respect SembCorp Marine Restricted Stock Plan granted vest only after the satisfactory completion of time-based service conditions or Under the Restricted Plan, awards after a further period of service beyond the performance target completion date is performance-related, the award where under the Restricted Plan and length No minimum vesting period is prescribed awards). (performance-based restricted will be determined on a case-by-case basis. Performance-based restricted of each award of the vesting period in respect granted under the Performance Plan in that an extended vesting period is imposed beyond awards from differ awards performance target completion date. with the when aggregated stock which could be delivered, and restricted The maximum number of performance shares capital of the of all options granted, is within the 15% limit share issued and issuable in respect number of new shares date of the grant. the relevant Company on the day preceding have been granted under the Restricted Plan during year. No awards of the total 5% or more options, received in share interests No participants, other than those disclosed under the directors’ number of options available. Audit Committee one of whom is also the Chairman Committee. The Audit Committee comprises 3 independent non-executive directors, are: The members of the Audit Committee at date this report Han Tew Tan Ajaib Haridass Chairman Haruo Kubota In performing its functions, the Audit Committee report. The Audit Committee has held 5 meetings since the last directors’ of their examination external and internal auditors to discuss the scope of their work, results met with the Company’s system. internal accounting control and evaluation of the Company’s The Audit Committee performs the functions specified in Section 201B of Companies Act, Listing Manual Exchange, and the Code of Corporate Governance. Singapore the following: The Audit Committee also reviewed 6.68 6.62 6.65 6.59 2004 2004 $’000 Cents 95,002 94,081 580,000 2,320,000 255,200 324,800 1,740,000 Shares Conditional Conditional Conditional Conditional Conditional Aggregate Aggregate Aggregate Aggregate Profit after taxation and minority interests: Profit - As reported - Proforma Earnings per share (in cents) : Earnings per share - As reported - Proforma (in cents) : Diluted earnings per share - As reported - Proforma options are as the estimated fair value of share disclosures of future amounts may not be representative These proforma under FRS 102) and which is of options granted after 22 November 2002 (transitional provisions only determined in respect amortised over the vesting period. ShareSembCorp Marine Performance Plan set based on medium-term granted conditional on performance targets are Plan, the awards Under the Performance Share given performance qualifying period. The final number of shares three-year corporate objectives at the start of each rolling performance period. A specific number of will depend on the level of achievement those targets over three-year the at the end of performance period provided by the Committee to recipient shall be released performance shares minimum level of targets achieved is not less than 80% the set. Recipients who do not meet at least 80% of the targets set end performance period will be granted than the original award performance shares If the achievement of targets exceeds 100%, more performance shares. up to a maximum of 200% the original award. could be delivered by the Committee to participants for performance was released a total of 255,200 performance shares During the year, period 2001 to 2003. as follows: since commencement of the Performance Plan were of the Company awarded The details of performance shares Performance SharesParticipants of the Company Director Kwi KinTan AwardedHeng Chiang Gnee during the year Shares Awarded 200,000 380,000 Shares 800,000 Released 1,520,000 Shares Lapsed 88,000 167,200 Outstanding Shares 112,000 212,800 1,140,000 600,000 Proforma financial effect under Financial Reporting Standards (“FRS”) 102 Shares Based Payment Proforma financial effect under Financial Reporting Standards (“FRS”) 102 Shares options granted and will in 2005, fair value has to be determined for share Based Payment effective Under FRS 102 Share the proforma and loss account beginning 1 January 2005. Strictly for information purposes only, be charged to profit and the earnings for 2004 would have been as follows had per share after taxation and minority interests consolidated profit the Company and its subsidiary companies accounted for fair value of options granted under FRS 102. Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD SembCorp Marine Ltd (cont’d)
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 131 the Group and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and are and consolidated cash flow statement together with notes thereto the Group of the as at 31 December 2004, and of the results of the Company and Group fair view of the state affairs for the year ended on and cash flows of the Group business, changes in equity of the Company and Group that date; and as and when they fall due. (i) and loss accounts, statements of changes in equity the Company the accompanying balance sheets, profit (ii) to believe that the Company will be able pay its debts grounds reasonable are at the date of this statement there Statement by Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD state that, in the opinion of SembCorp Marine Ltd, do hereby Han, being two of the Directors Tew Kwi Kin and Tan Tan We, of the Directors: On behalf of the Board, KWI KIN TAN President TEW HAN TAN Director Singapore 18 February 2005 The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It required The Audit Committee has full access to management and is given the resources to attend its meetings. The Audit Committee or executive officer to invite any director has full authority and the discretion the level of audit and non-audit fees. the appointment of external auditors and reviews also recommends to The Audit Committee is satisfied with the independence and objectivity of external auditors has recommended as auditors at the forthcoming be nominated for re-appointment that the auditors, Ernst & Young, of Directors the Board Annual General Meeting of the Company. Auditors as auditors. their willingness to accept re-appointment have expressed Ernst & Young On behalf of the Board, KWI KIN TAN President TEW HAN TAN Director Singapore 18 February 2005 Report of the Directors AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Audit Commitee (cont’d)
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 133 2004 2003 2004 2003 98,019 78,22595,002 54,514 78,540 79,669 54,514 79,669 $’000 $’000 $’000 $’000 120,364 104,904 6,994 5,204 114,009 95,186 63,920 97,154 for the year ended 31 December 2004 3 1,362,764 1,067,986 22,6214 20,060 93,853 74,308 654 8,183 9 Note Group Company Turnover Cost of sales profit Gross Other operating incomeGeneral and administrative expensesOperating profit incomeDividend and net interest (1,242,400)Exceptional items (47,631) of associated of results Share 5 companies and joint ventures (963,082) 21,120 (42,940) taxation before Profit (15,627) 9,944 7Taxation (7,088) 12,344 6 (14,856) after taxation Profit 11,600 13,278Minority interests (2,797) 748 (3,066) 76,482 attributable to members Profit 8,003 of the Company 5,776 1,275 86,402 8 (cents) Earnings per share (13,216) -Basic (15,990)Diluted 2,569 (3,017) (16,961) - (9,406) 315 (17,485) - 6.68 6.65 - 5.55 5.52 Profit and Loss Accounts AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD The accompanying notes form an integral part of the financial statements. changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, with the provisions drawn up in accordance properly changes in equity of the Company are so as to give a true and fair view of the state Financial Reporting Standards Cap. 50 (the “Act”) and Singapore and changes in equity of the Company as at 31 December 2004, the results of the Company and Group affairs for the financial year ended on that date; and and cash flows of the Group and of the Group with the provisions kept in accordance the auditors, have been properly of which we are incorporated in Singapore, of the Act. (a) and loss account, balance sheet statements of and the profit the consolidated financial statements of Group (b) by the Act to be kept Company and subsidiary companies required the accounting and other records Auditors’ Report to the Members of SembCorp Marine Ltd AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD have audited the accompanying financial statements of SembCorp Marine Ltd (the “Company”) and its subsidiary We set out on pages 133 to 179 for the year ended 31 December 2004. These financial statements companies (the “Group”) an opinion on these financial statements is to express Our responsibility Directors. of the Company’s the responsibility are based on our audit. that we plan and require on Auditing. Those Standards Standards with Singapore conducted our audit in accordance We of material misstatement. free assurance about whether the financial statements are perform the audit to obtain reasonable in the financial statements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures as well An audit also includes assessing the accounting principles used and significant estimates made by Directors, basis for our opinion. a reasonable believe that our audit provides We evaluating the overall financial statement presentation. In our opinion, ERNST & YOUNG Certified Public Accountants Singapore 18 February 2005
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 135 2004 2003 2004 2003 33,810 14,746 - - $’000 $’000 $’000 $’000 968,900 927,127 803,909 800,659 204,963 52,069 180,677 31,781 1,002,710 941,873 803,909 800,659 1,002,710 941,873 803,909 800,659 1,207,673 993,942 984,586 832,440 Note Group Company as at 31 December 2004 Capital and reserves capitalShare ReservesMinority interests 26 27 142,761 826,139 142,005 785,122 142,761 661,148 142,005 658,654 Total assets less current liabilities assets less current Total liabilities Non-current Borrowings taxationDeferred creditors purchase Hire Other provisions liabilities non-current Total 24 23 22 25 47,980 149,645 333 7,005 47,678 1,165 - 28,137 3,226 149,645 - 31,781 2,895 - - - Balance Sheets AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD The accompanying notes form an integral part of the financial statements. 2004 2003 2004 2003 $’000 $’000 $’000 $’000 639,431 755,450 768,915 690,969 651,692568,242 531,173 238,492 8,654 215,671 36,530 141,471 1,219,934 769,665 224,325 178,001 Note Group Company as at 31 December 2004 Current assets Current Stocks and work-in-progress debtorsTrade Other debtorsAsset held for sale 16Fixed depositsBank and cash balances 390,940 assets current Total 14 255,972 17(d) 17 liabilities Current creditorsTrade 267,237 18 and provisionsOther creditors 53,192 39,081 billings in excess of Progress - 108,320 work-in-progress 210,455 361,164Borrowings 20 100,452 for taxationProvision 70,798 50,033 - 152,753 53,073 19 - liabilities current Total 24,358 29,561 70,893 81,440 21 assets Net current 474,643 - 90,479 21,343 136,414 4,746 22 1,336 373,425 2,244 16,277 - 19,572 6,067 - 1,195 15,804 - 5,335 101,029 343 - - - 30,000 Non-current assets Non-current Fixed assetsSubsidiary companiesAssociated companies and joint venture 12Other long term investmentsLong term trade debtorsGoodwill on consolidation 67,487 11 tax assetsDeferred 13 10 assets non-current Total 14 58,700 15 23,853 460,020 - 26,387 83,249 23 71,776 3,352 452,720 27,026 168,639 176,449 19,227 - 1,470 3,615 56,000 490,852 178,693 67,965 - - 66,786 350,499 - - - Balance Sheets AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 137 Group Company for the year ended 31 December 2004 2004 2003 2004 2003 $’000 $’000 $’000 $’000 968,900 927,127 803,909 800,659 The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary by the Company. dividends as and when declared entitled to receive are shares The holders of ordinary without restriction. carry one vote per share shares Statements of Changes in Equity AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD account premium Share Balance at 1 January issued on on shares Premium options of share exercise Balance at 31 December reserve Asset revaluation Balance at 1 January and 31 December 4,861 237,950Other capital reserves Balance at 1 January 234,471 3,479 242,811 and loss account upon to the profit Transfer 960 disposal of other long term investment 237,950 by an associated company off Write 4,861 237,950 upon redemption reserve to revenue Transfer convertible loan stock of redeemable 960 234,471 242,811 - 3,479 Balance at 31 December - 237,950 960 (114) (16,471) 397 equity shareholders’ Total (155) 17,023 - 960 -(1) 283 - -The accompanying notes form an integral part of the financial statements. - - 397 - - - - - Net change in equity from non-ownerNet change in equity from excluding net profits sources (1,965) (1,851) - - Group Company for the year ended 31 December 2004 2004 2003 2004 2003 $’000 $’000 $’000 $’000 (1)
Issued capital - ordinary shares Issued capital - ordinary Statements of Changes in Equity AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD Balance at 1 January 1,420,051,880 (2003: 1,414,322,980) shares of $0.10 each Issue of 7,555,750 (2003: 5,729,400) shares 142,005 options of share of $0.10 each upon exercise Balance at 31 December 141,432 7561,427,607,630 (2003: 1,420,051,880) shares of $0.10 each 142,005 142,761Revenue reserve 573 141,432 Balance at 1 January 142,005 for the yearProfit Note 28(b) shares Dividends on ordinary 756 142,761 upon other capital reserve from Transfer convertible loan stock of redeemable redemption (56,881) 142,005 Balance at 31 December 573 548,381 translation reserve currency Foreign - (71,841)Balance at 1 January 95,002 (56,881)Realisation upon disposal of joint venture 541,527 for the year differences Translation 155 419,744 586,502 78,540 (71,841) Balance at 31 December - 411,916 54,514 548,381 - (1,851) (2,566) 417,377 (5,310) 79,669 (1,851) - 419,744 4,595 (4,417) - - (2,566) ------
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 139 Acquisition of - (7,652) subsidiary companies (310)(102) (642) (335) (394) (14,700) (660) (4,607) 2004 2003 2004 2003 2004 2003 $’000 $’000 $’000 $’000 4,976 8,881 $’000 $’000 (3,304) (5,120) 18,454 26,227 (22,861) (40,398) 321,077148,407 39,227 109,180 for the year ended 31 December 2004 Name of subsidiary companies acquired interest Effective dates Effective Net increase in cash and equivalents Net increase Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Note 31)The acquisitions of the following subsidiary companies have been shown as a single item: Clavon Pte Ltd and its subsidiary companiesJurong Pte Ltd and its subsidiary companiesPPL Shipyard on the individual assets and liabilities is set out below: The effect 469,484 5%Fixed assets 35% 148,407 1 January 2004 1 July 2003 Other long term investmentStocks and work-in-progressDebtors Bank and cash balances unsecuredBank overdrafts, Bank loans Creditors taxation Current taxation Deferred Net assets acquiredMinority interests 7,450 1 (722) 456 34,260 3,700 (1,174) 11,267 7,342 34,134 Amount taken up as associated companyGoodwill on acquisition consideration paidPurchase by: The acquisition subsidiary companies, net of cash is represented (3,671) (17,067) 394 27 14,700 2,753 Cash paid Less: Bank and cash balances acquired acquired unsecured Add: Bank overdrafts, Net cash outflow 456 (722) 11,267 (1,174) Consolidated Statement of Cash Flows AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD 2004 2003 $’000 $’000 5,617 4,052 (1,655) (2,654) 93,853 74,308 39,387 (16,065) 63,416 (4,302) 123,995 104,876 220,398 83,078 218,274 59,594 for the year ended 31 December 2004 Cash flow from operating activities Cash flow from Operating profit Adjustments for: Gain on disposal of fixed assetsAmortisation of goodwill on consolidation subsidiary companies convertible loan stock discountAmortisation of redeemable costsAmortisation of borrowing Goodwill on consolidation written-off of fixed assetsDepreciation Fixed assets written-off in working capital reinvestment Operating income before in stocks and work-in-progress(Increase)/decrease in debtorsDecrease in asset held for saleIncrease in creditorsIncrease/(decrease) - operations Cash generated from income receivedInvestment and interest -Income taxes paid paid Interest 1,260 by operating activities Net cash provided investing activities Cash flow from (7,681) 91 Acquisition of subsidiary companiesInvestment in associated company and joint venture (10,676) of fixed assetsPurchase 292 of other long term investmentsPurchase 20 associated companies from Capital refund (4,735) associated companiesDividends from 24,686 37,499 disposal of fixed assets from Proceeds disposal of associated companies and joint venture from Proceeds sale of other long term investments from Proceeds of bond principal repayment from Proceed - 12 33,945 - (53,192) by/(used in) investing activities Net cash provided 13,565 85,927 financing activities Cash flow from 74,344Dividends paid - by the Company (1,309) (51,420) 13,865 21,443- to minority shareholders 7 on issue of new shares Proceeds - - by the Company 4,936 - to minority shareholders (14,034)(Repayment of)/additional short term bank loan (250) (660) (14,314) issue of medium term note from Proceeds 7,349 creditors purchase Repayment to hire 59,302Fixed deposit pledged discharged/(pledged) with a bank for banking facilities - (34,695) 5,185 57,572 by/(used in) financing activities Net cash provided (4,607) (1,641) (88,552) 11,290 720 54,379 510 3,440 (32,627) 471 (1,120) - (101,029) 149,625 65,577 (402) (56,881) (1,401) 13,508 (71,841) - (241) (729) - Consolidated Statement of Cash Flows AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 141 - 31 December 2004 The financial statements are presented in Singapore dollars. The financial statements have been prepared in dollars. The financial statements have been prepared in Singapore presented The financial statements are by the Companies Act. (“FRS”) as required Financial Reporting Standards with Singapore accordance of under the historical cost basis modified by revaluation The financial statements have been prepared year, certain fixed assets. The accounting policies have been consistently applied with those used in the previous except for the change in accounting policy outlined paragraph (e) below. The accounting year of the Company and all its subsidiary companies ends on 31 December consolidated financial statements incorporate the of Company and all its subsidiary companies after attributable to majority transactions. The equity and net profit the elimination of all material intercompany and loss shown separately in the consolidated balance sheet and profit are interests shareholders’ included or disposed of during the year are of subsidiary companies acquired The results account, respectively. dates of acquisition or disposal, as applicable. the respective from results the Group in or excluded from the excess of cost acquisition over fair value Goodwill arising on acquisition which represents is accounted on the basis outlined in paragraph (e) below. of the identifiable net assets acquired share Group’s using uniform accounting policies for like transactions and prepared The consolidated financial statements are other events in similar circumstances. dollars on the translated into Singapore of the overseas subsidiary companies are Assets, liabilities and results basis outlined in paragraph (s) below. stated at cost and allowance is made for impairment in value. Dividend in subsidiary companies are Shares income is accrued on the basis of dividends declared. The cost method of accounting is used to account for the acquisition subsidiaries by Group. The purchase as the fair value of assets given, equity instruments issued and liabilities of an acquisition is measured attributable to the acquisition. Any excess of or assumed at the date of exchange, plus costs directly incurred as goodwill. Any is recognised cost of acquisition over the fair values identifiable net assets acquired (i.e. discount on deficiency of the cost acquisition below fair values identifiable net assets acquired is of minority shareholders and loss in the period of acquisition. The interest to profit acquisition) is credited any Subsequently, of the fair values assets and liabilities recognized. proportion stated at the minority’s of allocated against the interests are in excess of the minority interest losses applicable to the minority interest the parent. The Company is a limited liability company incorporated in the Republic of Singapore. Its immediate holding company The Company is a limited liability company incorporated in the Republic of Singapore. Holdings (Private) Limited. Both holding is SembCorp Industries Ltd and the ultimate holding company Temasek parties in these financial Related companies and related incorporated in the Republic of Singapore. companies are Holdings to subsidiary and associated companies of SembCorp Industries Ltd Temasek statements refers (Private) Limited respectively. Kling Road, and principal place of business the Company is located at 29 Tanjong office The registered 628054. Singapore of management services and investment holding. The principal provision The principal activities of the Company are have been no significant stated in Note 37. There activities of subsidiary companies and associated are of these activities the Company and its subsidiary companies during year. changes in the nature (a) Basis of preparation of financial statements (b) Principles of consolidation (c) Subsidiary companies Notes to the Financial Statements AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD 1.General 2.Significant accounting policies 871 (5,795) (486)(736) 888 974 2004 2003 $’000 $’000 1,614 80,192 for the year ended 31 December 2004 Contribution to the Group for the period: Contribution to the Group Turnover taxation before Profit/(loss) Goodwill written off/amortisation taxation before Profit/(loss) Taxation after taxationProfit/(loss) Minority interests assets at 31 DecemberTotal liabilities at 31 DecemberTotal 2,122 (29) 2,093 (7,381) (276) (7,657) 1,607 (6,769) 29,694 21,655 78,519 50,931 Consolidated Statement of Cash Flows AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD at 31 December and its results of the acquisitions subsidiary companies on financial position Group The effect for the year is shown below: The accompanying notes form an integral part of the financial statements.
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
2. Significant accounting policies (cont’d)
(d) Associated companies and joint ventures The effects of the early adoption of FRS 103 are as follows: An associated company is defined as a company, not being a subsidiary company, in which the Group has a long a. there is no restatement to the Group’s opening revenue reserve as at 1 January 2004, as there is no term interest of not less than 20% nor more than 50% of the equity and in whose financial and operating policy adjustment for previously recognised negative goodwill; decisions the Group exercises significant influence. b. elimination of a potential goodwill amortisation of $4,494,000 in the financial year 2004 Group Profit & Loss Account, offset by A joint venture, not being a subsidiary or associated company, is one in which the Group has a long term interest c. goodwill written off of subsidiary companies amounting to $292,000. and contractual arrangement whereby parties in the joint venture undertake an economic activity whose operational and financial affairs are subject to the joint control of the Group and the contractual parties. Goodwill Goodwill arising on acquisition represents the excess of the cost of acquisition over the fair value of the Group’s The Group’s share of the results of associated companies and joint ventures that are jointly controlled entities are share of the identifiable assets and liabilities acquired. Goodwill on acquisitions of subsidiary companies is included included in the consolidated profit and loss account under the equity method. The Group’s share of post-acquisition in intangible assets. Goodwill on acquisition of associated companies is included in investments in associated reserves of associated companies and joint ventures that are jointly controlled entities are included in the investments companies. in associated companies and joint ventures, respectively, in the consolidated balance sheet. Where the audited financial statements are not available, the share of results is arrived at from unaudited management financial Goodwill is stated at cost and allowance is made for impairment in value. statements made up mainly to the end of the accounting year to 31 December. Goodwill arising on acquisition which represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable Negative Goodwill net assets acquired is accounted on the basis outlined in paragraph (e) below. Negative goodwill arising on acquisition represents the excess of the net fair value of the Group’s share of the identifiable net assets acquired over the cost of acquisition. When the Group’s share of losses exceeds the carrying amount of the investment, the investment is reported at nil value and recognition of losses is discontinued except to the extent of the Group’s commitments. The early adoption of FRS 103 requires that if at the acquisition date, the Group’s interest in the net fair value of those items acquired exceeds the cost of acquisition, the identification and measurement of the acquiree’s For joint ventures that involves jointly controlled operations or assets, the proportionate share in these joint identifiable assets, liabilities and contingent liabilities and the measurement of the cost of acquisition are reassessed. Any excess remaining after the reassessment are recognised by the Group in the profit and loss account. ventures’ individual income, expenses, assets and liabilities are included in financial statements of the Group with items of a similar nature on a line by line basis. Previously before the adoption of FRS 103, to the extent that negative goodwill relates to an expectation of future losses and expenses, that are identified in the plan of acquisition and can be measured reliably, but which have Shares in associated companies and joint ventures are stated in the Company’s balance sheet at cost and not yet been recognised, it is recognised in the profit and loss account when the future losses and expenses are allowance is made for impairment in value. recognised. Any remaining negative goodwill, but not exceeding the fair values of the non-monetary assets acquired, is recognised in the profit and loss account over the weighted average useful life of those assets that Dividend income is accrued on the basis of dividends declared. are depreciable or amortisable. Negative goodwill in excess of the fair values of the non-monetary assets acquired is recognised immediately in the profit and loss account. (e) Goodwill on Consolidation On 1 July 2004, the Council on Corporate Disclosure and Governance issued Financial Reporting Standard (f) Revenue recognition (“FRS”) 103 Business Combinations, revised FRS 36 Impairment of Assets and revised FRS 38 Intangible Assets. Revenue from ship and rig repair, building and conversion are recognised on the percentage of completion Accordingly, FRS 22 Business Combinations was withdrawn. method in proportion to the stage of completion, provided the work is at least 20% completed and the outcome of the contract can be reliably estimated. The percentage of completion is measured by reference to the percentage These standards are to be applied to the accounting for business combinations for annual periods beginning on of costs incurred to-date to the estimated total costs for each contract, with due consideration made to include or after 1 July 2004. However, early adoption of these standards is permitted and must be applied prospectively only those costs that reflect works performed. from the same date. Income on goods sold and other services rendered is recognised on completion of delivery. Charter hire income The Group has decided to early adopt FRS 103, revised FRS 36 and revised FRS 38. The standards are applied is taken to the profit and loss account on an accrual basis over the charter hire period. on a prospective basis effective 1 January 2004. (g) Fixed assets The early adoption of FRS 103 has not resulted in any prior year adjustments. The carrying value of goodwill Fixed assets are stated at cost or valuation less accumulated depreciation. The cost of an asset comprises its brought forward from the previous year are accounted for as costs and tested for impairment annually. purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and eport 2004 The early adoption of FRS 103, revised FRS 36 and revised FRS 38 resulted in a change in the accounting repairs are charged to the profit and loss account. When assets are sold or retired, their cost and accumulated treatment for goodwill. FRS 103 requires goodwill acquired in a business combination to be measured at cost depreciation are removed from the financial statements and any gain or loss resulting from their disposal is less any accumulated impairment losses. Goodwill shall no longer be amortised, instead, impairment is tested included in the profit and loss account. annually, or more frequently if events or changes in circumstances indicate that the goodwill might be impaired. The replaced FRS 22 required acquired goodwill to be systematically amortised over its useful life, and included Where fixed assets are revalued, any surplus on revaluation is credited to the asset revaluation reserve. A decrease a rebuttable presumption that its useful life could not exceed twenty years from initial recognition. in net carrying amount arising on revaluation of fixed assets is charged to the profit and loss account to the extent that it exceeds any surplus held in reserve relating to previous revaluation of the same class of assets.
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Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
2. Significant accounting policies (cont’d)
(h) Depreciation (n) Employee benefits Depreciation is calculated on the straight-line method to write off the cost or valuation of fixed assets over their Defined contribution plan estimated useful lives. No depreciation is provided on freehold land. The estimated useful lives of fixed assets are The Group’s companies in Singapore make contributions to the state pension scheme, the Central Provident as follows: Fund, as required by Singapore law. Contributions to this fund are recognised as compensation expense in the Freehold and leasehold buildings 45 years or remaining period of lease same period as the employment that gives rise to the contribution. Quays and dry docks 60 years or remaining period of lease Plant, machinery and tools 3 to 10 years Employee leave entitlement Motor vessels, launches, cranes Employee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for and floating docks 3 to 20 years the estimated liability for leave as a result of services rendered by employees up to the balance sheet date. Motor vehicles 3 to 5 years Furniture and office equipment 3 to 5 years Employee Stock Option Utilities and fittings 30 years The Group has an employee share incentive plan for the granting of non-transferable share options. No Computer equipment 1 to 5 years compensation cost or obligations are recognised. When the options are exercised, equity is increased by the amount of the proceeds received. Fully depreciated assets are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets. Retirement gratuity Retirement benefits payable to certain categories of employees upon their retirement are provided for in the (i) Investments financial statements based on their entitlement under the staff benefit plan or, in respect of unionised employees Investments held on a long-term basis are stated at average cost. Provision is made for impairment in value. who joined on or before 31 December 1988, based on an agreement with the Union.
Dividend income is recognised in the profit and loss account upon actual receipt. Interest income is accrued on The Group’s net obligation in respect of retirement benefit is the amount of future benefits that employees had the day-to-day basis. earned in return for their service in the current and prior periods. The obligation is calculated using the projected salary increase and is discounted to its present value and the fair value of any related assets is deducted. (j) Stocks and work-in-progress Stocks consist mainly of steel and other materials used for ship and rig repair, building and conversion and are Performance share plan stated at the lower of cost and net realisable value. Cost is principally determined on the weighted average An initial estimate is made for the cost of compensation under the Group’s performance share plan based on the method. Allowance is made for all deteriorated, obsolete and slow-moving items. number of shares expected to be awarded at the end of the performance period, valued at market price at the date of the grant of the award. The cost is charged to the profit and loss account on a basis that fairly reflects the Work-in-progress comprises mainly uncompleted ship and rig repair, building and conversion jobs. It is stated at manner in which the benefits will accrue to the employee under the plan over the service period to which the the lower of cost and net realisable value. Cost includes materials, direct labour, sub-contractors’ costs and performance criteria relate. appropriate allocation of fixed and variable production overheads. Allowance is made for anticipated losses, if any, on work-in-progress when the possibility of loss is ascertained. At each reporting date, the compensation cost is remeasured based on the latest estimate of the number of shares that will be awarded considering the performance criteria and the market price of the shares at the (k) Trade and other debtors reporting date. Any increase or decrease in compensation cost over the previous estimate is recorded in the Trade and other debtors, including related companies and related parties, on normal trade terms, are recognised profit and loss account for that reporting period. and carried at original invoiced amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. The final measure of compensation cost is based on the number of shares ultimately awarded and the market price at the date the performance criteria are met. (l) Trade and other creditors Liabilities for trade and other creditors, including related companies and related parties, on normal trade terms, Restricted stock plan are carried at cost which is the fair value of the consideration to be paid in the future of goods and services An initial estimate is made for the cost of compensation under the Group’s restricted stock plan based on the received, whether or not billed to the Group. numbers of shares expected to be awarded upon satisfactory completion of time-based service condition, valued at market price at the date of the grant of the award. The cost is charged to the profit and loss account on eport 2004 (m) Finance leases and hire purchase assets a basis that fairly reflects the manner in which the benefits will accrue to the employee under the plan over the Finance leases are those leasing agreements including hire purchases that give rights approximating to ownership. service period to which the performance criteria relate. Assets financed under such leases are treated as if they had been purchased outright at the present value of the minimum lease payments during the periods of leases and the corresponding leasing commitments are shown At each reporting date, the compensation cost for remaining shares to be released under the restricted stock as obligations to the lessor. Depreciation of the relevant assets is provided for as in paragraph (h) above. Lease plan in remeasured based on the market price of shares at the reporting date. Any increase or decrease in payments are treated as consisting of capital and interest elements and the interest is amortised on the reducing compensation cost over the previous estimate is recorded in the profit and loss account for that reporting period. balance basis over each lease term and charged to the profit and loss account.
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SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
2. Significant accounting policies (cont’d)
(o) Borrowings (r) Deferred taxation Interest bearing loans Deferred taxation is provided, using the liability method, on all temporary differences at the balance sheet date Interest bearing loans are initially recognised at cost and subsequently measured at amortised cost using the between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. effective interest rate method. The difference between net proceeds and redemption value being recognised in Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the the profit and loss account in the period over the life of the borrowings. years on which those temporary differences are expected to be recovered or settled based on the tax rates enacted or substantively enacted at the balance sheet date. Redeemable convertible loan stock The components of the loan stock are split using the incremental method, where the value of the equity component Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiary is the difference between the total proceeds at the date of issue and the present value of a similar liability companies, associated companies and joint ventures, except where the timing of reversal of the temporary instrument without conversion right. difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The equity component of the loan is included in the redeemable convertible loan stock reserve. The financial component is initially recognised at fair value and subsequently at amortised cost. Amortised cost is calculated Deferred tax assets are recognised for all deductible temporary differences, carry- forward of unused tax assets by taking into account the discounts on settlement. The discount is amortised over the life of the redeemable and unused tax losses, to the extent that it is probable that taxable profit will be available against which the convertible loan stock and charged directly to the profit and loss account. deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.
(p) Provisions Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited A provision is recognised when there is a present obligation (legal or constructive) as a result of a past event and or charged, in the same or different period, directly to equity. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance (s) Foreign currencies sheet date and adjusted to reflect the current best estimate. Foreign currency transactions are recorded in Singapore dollars at rates of exchange approximating those ruling at transaction dates. Foreign currency monetary assets and liabilities are translated at rates ruling at the balance (q) Impairment sheet date. All exchange differences are dealt with in the profit and loss account. The carrying amounts of the Group’s assets, other than stocks and work-in-progress, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the For inclusion in the consolidated financial statements, all assets and liabilities of the foreign subsidiary companies, asset’s recoverable amount is estimated. associated companies and joint ventures are translated into Singapore dollars at the exchange rates ruling at the balance sheet date and the results of foreign subsidiary companies, associated companies and joint ventures An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds are translated into Singapore dollars at the average exchange rates. Exchange differences due to such currency its recoverable amount. All impairment losses are recognised in the profit and loss account. translations are included in the foreign currency translation reserve.
Calculation of recoverable amount (t) Cash and cash equivalents The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, Cash and cash equivalents consist of cash at bank and in hand and fixed deposits less bank overdrafts but the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects exclude secured fixed deposits and bank overdrafts which are used for financing activities. current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined (u) Derivative financial instruments for the cash-generating unit to which the asset belongs. Derivative financial instruments are used to manage exposure to foreign exchange risks arising from operational, financing and investment activities. Derivative financial instruments are not used for trading purposes. Gains and Reversal of impairment loss losses from forward exchange contracts used to hedge anticipated future currency transactions are deferred An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable until the forecasted transaction occurs. Where the hedged item is a recognised asset or liability, it is translated at amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the the contracted forward rates. carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. A reversal of an impairment loss in respect of land and buildings carried at revalued amount is recognised in the same way as a revaluation increase. All other reversals of impairment are recognised in the eport 2004 profit and loss account.
An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exception nature that is not expected to recur, and the increase in recoverable amount relates clearly to the reversal of the effect of that specific event.
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SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
3. Turnover 5. Dividend & net interest income Turnover represents sales from the various activities described in Note 1 and Note 37, including the revenue recognised Group Company on contracts relating to the ship and rig repair, building and conversion which are at least 20% completed. 2004 2003 2004 2003 $’000 $’000 $’000 $’000 Group Company Gross dividend: 2004 2003 2004 2003 Unquoted subsidiary companies - - 62,615 78,495 $’000 $’000 $’000 $’000 Unquoted associated companies - - 7,490 533 Services rendered Quoted equity shares 408 7 408 7 Ship & rig repair, building 1,315,086 1,016,839 - - Unquoted equity shares 712 90 648 90 and conversion Ship chartering 12,798 19,618 - - 1,120 97 71,161 79,125 Rental income - - 16,369 15,499 Management fee - - 6,252 4,561 Interest income: Others 10,789 6,483 - - Subsidiary company - - 1,026 - Sale of goods 24,091 25,046 - - Related parties 2,568 2,740 2,251 2,405 Unquoted bonds 2,989 4,346 2,989 4,346 1,362,764 1,067,986 22,621 20,060 Trade debtors 2,632 4,738 737 940 Fixed deposits 2,915 1,972 182 44 Loan to related companies 233 104 - - Others 309 266 59 138 4. Operating profit Operating profit is stated after charging/(crediting): 11,646 14,166 7,244 7,873
Group Company Interest expense: 2004 2003 2004 2003 Redeemable convertible loan stock - (1,760) - - $’000 $’000 $’000 $’000 Subsidiary companies - - (28) (189) Directors’ remuneration - Related company (20) (19) - - Directors of the Company 1,497 1,390 1,497 1,390 Bank borrowings (2,802) (884) (1,895) (407) Other directors of subsidiary companies 3,417 2,129 - - Directors’ fee - (2,822) (2,663) (1,923) (596) Directors of the Company 337 332 337 332 Other directors of subsidiary companies 17 17 - - 9,944 11,600 76,482 86,402 Professional fees paid to a firm in which a Director is a member 116 10 67 10 Foreign currency exchange loss/(gain) 1,822 3,342 2,642 (1,077) 6. Exceptional items Gain on disposal of fixed assets (7,681) (4,735) (26) (4,625) Group Company Rental expenses 21,515 19,353 6,998 7,200 2004 2003 2004 2003 Auditors’ remuneration - $’000 $’000 $’000 $’000 Auditors of the Company Gain/(loss) on disposal of: Statutory audit 475 464 72 73 Joint venture company, Note (a) 3,444 1,951 - - Other services 52 31 40 27 Long term equity investments, Note (a) 1,990 337 1,990 1,744 Other auditors of subsidiary companies Long term unquoted bond (5,000) - (5,000) - Statutory audit 36 52 - -
eport 2004 434 2,288 (3,010) 1,744
As at 31 December 2003, the Group and Company had 5,722 and 18 (2003: 5,469 and 14) employees respectively. Impairment loss Staff costs, which include Directors’ remuneration for the year, amounted to $182,477,000 (2003: $166,470,000) Fixed assets, Note (b) (3,500) (2,113) - - and $4,865,000 (2003: $3,565,000) for the Group and Company, respectively. Central Provident Fund contributions Subsidiary company - - (9,866) - which amounted to $9,407,000 (2003: $8,843,000) and $54,000 (2003: $79,000) for the Group and Company, respectively, were included as part of staff costs for the year. (3,500) (2,113) (9,866) -
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SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
6. Exceptional items (cont’d) Group Company 8. Taxation 2004 2003 2004 2003 Group Company $’000 $’000 $’000 $’000 2004 2003 2004 2003 Write-back/(provision) for impairment $’000 $’000 $’000 $’000 in value of: In respect of profit for the year: Other long term equity investments - 1,391 - 1,391 Current taxation 15,338 15,569 12,595 19,637 Other long term non-equity investments - (291) - (201) Deferred taxation 3,200 4,814 (755) (200) Loan to an associated company - - (340) (365) 18,538 20,383 11,840 19,437 - 1,100 (340) 825 (Over)/under provision in respect (3,066) 1,275 (13,216) 2,569 of prior years: Current taxation 273 (3,022) 455 (1,732) Deferred taxation (4,473) (246) (2,889) (220) (a) Gain on disposal is stated after consideration of realisation of other capital reserves and foreign currency translation reserve as follows: (4,200) (3,268) (2,434) (1,952) Group Company 2004 2003 2004 2003 Share of taxation of associated companies $’000 $’000 $’000 $’000 and joint venture 1,652 (154) - - Foreign currency translation reserve Joint venture company - 5,310 - - 15,990 16,961 9,406 17,485
Other capital reserve Other long term equity investments - 16,471 - - The Group and the Company have exempt profits amounting to approximately $132,134,000 (2003: $127,800,000) and $29,368,000 (2003: 26,200,000), respectively. Of this amount, $96,411,000 (2003: $106,700,000) for the Group has been agreed with the Comptroller of Income Tax. (b) Due to the continued difficult operating environment in Karimun, the impairment loss for fixed assets in the “Ship and rig repair, building and conversion” business segment of $3.5 million (2003: $2 million) represents the write-down of As at 31 December 2004, certain subsidiary companies have unutilised tax losses of $71,754,000 (2003: $60,886,000) certain fixed assets to their recoverable amount. The recoverable amount was determined based on the value-in- and capital allowances of $6,670,000 (2003: $16,283,000), available for set-off against future taxable income subject use at the cash generating unit level. In determining the value-in-use at the cash generating unit level, the cashflows to the provisions of the Income Tax Act and agreement by the Comptroller of Income Tax. were discounted at rate of 6% per annum on a pre-tax basis. The unutilised tax losses and capital allowance in a subsidiary company amounting $52,827,000 (2003: $40,818,000) 7. Share of results of associated companies and joint ventures will expire between 2004 to 2009 (2003: 2003 to 2008). Group 2004 2003 The amounts of tax losses and capital allowances previously carried forward at the beginning of the year and which $’000 $’000 have been utilised in the year to arrive at the computation of tax liabilities for the year are not significant. Share of net profit for the year 13,278 11,111 Amortisation of goodwill on acquisition of an associated company - (3,108)
13,278 8,003
Share of taxation (1,652) 154
eport 2004 11,626 8,157
150 151
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
8. Taxation (cont’d)
A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate 10. Fixed assets for the years ended 31 December was as follows: Docks, Group Company quays, 2004 2003 2004 2003 launches, $’000 $’000 $’000 $’000 Land and Building cranes and Plant, Short term Construction- marine machinery Tax at 20% (2003: 22%) 20,146 19,180 12,784 21,374 Group Freehold leasehold in-progress vessels and tools Others Total Exempt income, capital gains and $’000 $’000 $’000 $’000 $’000 $’000 $’000 tax incentives (4,636) (3,884) (3,708) (2,252) Cost or valuation Effect of different tax rate in Balance at 1 January 2004 foreign jurisdiction 1,382 241 - - At cost 4,387 132,061 1,258 455,351 183,922 34,660 811,639 Effect on tax losses utilised (425) (445) - - At valuation - - - 25,152 - - 25,152 Non deducible expenses 1,939 1,268 2,803 315 Effect on changes in tax rates (4,345) - (2,889) - 4,387 132,061 1,258 480,503 183,922 34,660 836,791 Under/(over) provision in respect of prior years 145 (3,268) 455 (1,952) Currency re-alignment (136) - - - (12) (19) (167) Deferred tax assets not recognised 44 3,905 - - Additions 5 3,997 63,328 7,227 11,660 2,335 88,552 Others 88 118 (39) - Acquisition of subsidiary companies 137 3,091 - 79 9,080 612 12,999 Effective tax 14,338 17,115 9,406 17,485 Reclassifications - (3,361) - 19,101 (19,904) 4,164 - Transfers - 1,469 (2,018) - 549 - - Share of taxation of associated companies Disposals - - - (54,750) (966) (927) (56,643) and joint venture 1,652 (154) - - Write-off - - - (2,130) (196) (436) (2,762)
15,990 16,961 9,406 17,485 At 31 December 2004 4,393 137,257 62,568 450,030 184,133 40,389 878,770
Balance at 31 December 2004 9. Earnings per share At cost 4,393 137,257 62,568 424,878 184,133 40,389 853,618 (a) Basic earnings per share (“EPS”) is calculated by dividing the profit attributable to shareholders after deducting At valuation - - - 25,152 - - 25,152 minority interests of $95,002,000 (2003: $78,540,000) by the weighted average number of ordinary shares in issue during the year of 1,421,361,495 (2003: 1,415,768,518). 4,393 137,257 62,568 450,030 184,133 40,389 878,770
Accumulated depreciation/ (b) Diluted EPS is calculated after adjusting for those shares not yet exercised under the SembCorp Marine Share impairment loss Option Plan as follows: At 1 January 2004 467 57,058 - 171,828 123,523 31,195 384,071 Currency re-alignment (14) - - - (12) (19) (45) Group Charge for the year 74 3,756 - 16,829 14,076 2,764 37,499 2004 2003 Acquisition of Weighted average number of ordinary shares in issue during the year 1,421,361,495 1,415,768,518 subsidiary companies - 703 - 8 6,816 496 8,023 Effects of dilutive share options 6,561,000 7,034,000 Reclassifications (44) (443) - 12,399 (14,203) 2,291 - Disposals - - - (9,761) (934) (853) (11,548) Weighted average number of ordinary shares outstanding used in the 1,427,922,495 1,422,802,518 Write-off - - - (2,130) (186) (434) (2,750) calculation of diluted EPS Impairment loss - 1,350 - 1,202 931 17 3,500
(c) The basic and diluted EPS are as follows: At 31 December 2004 483 62,424 - 190,375 130,011 35,457 418,750 eport 2004 Group 2004 2003 Charge for 2003 85 3,163 - 15,698 12,147 2,852 33,945 Cents Cents Basic EPS 6.68 5.55 Net book value Diluted EPS 6.65 5.52 At 31 December 2004 3,910 74,833 62,568 259,655 54,122 4,932 460,020
At 31 December 2003 3,920 75,003 1,258 308,675 60,399 3,465 452,720
152 153
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
10. Fixed assets (cont’d)
Docks, 11. Subsidiary companies quays, Company launches, 2004 2003 Land and Building cranes and Plant, $’000 $’000 Short term marine machinery Company Freehold leasehold vessels and tools Others Total Unquoted shares, at cost 267,919 267,325 Allowance for impairment in value (15,251) (5,385) $’000 $’000 $’000 $’000 $’000 $’000 Cost or valuation 252,668 261,940 Balance at 1 January 2004 At cost 1,553 43,984 177,883 4,023 677 228,120 Loans to subsidiary companies 238,184 88,559 At valuation - - 25,152 - - 25,152 490,852 350,499 1,553 43,984 203,035 4,023 677 253,272 Additions - 2,195 900 - 57 3,152 Allowance for impairment in value of a subsidiary company Reclassifications - (3,342) - 3,342 - - Balance at 1 January 5,385 5,385 Charge for the year 9,866 - At 31 December 2004 1,553 42,837 203,935 7,365 734 256,424 Balance at 31 December 15,251 5,385 Balance at 31 December 2004 At cost 1,553 42,837 178,783 7,365 734 231,272 At valuation - - 25,152 - - 25,152 The loans to subsidiary companies are unsecured, interest free and is not expected to be repaid within the next twelve months. 1,553 42,837 203,935 7,365 734 256,424 The Company’s subsidiary companies are set out in Note 37. Accumulated depreciation At 1 January 2004 132 17,734 53,795 2,359 559 74,579 12. Associated companies and joint venture Charge for the year 35 1,012 3,435 858 56 5,396 Reclassifications - (446) - 446 - - Group Company 2004 2003 2004 2003 At 31 December 2004 167 18,300 57,230 3,663 615 79,975 $’000 $’000 $’000 $’000 Charge for 2003 44 965 3,382 133 45 4,569 Associated companies Unquoted shares, at cost 20,592 19,491 18,331 18,531 Net book value Share of net post-acquisition profits 20,580 22,254 - - At 31 December 2004 1,386 24,537 146,705 3,702 119 176,449 Goodwill on acquisition, Note (a) 6,214 6,214 - -
At 31 December 2003 1,421 26,250 149,240 1,664 118 178,693 47,386 47,959 18,331 18,531 Loans and advances to associated companies, Note (b) 10,630 10,630 8,056 8,495 (a) Docks and quays are stated at Directors’ valuation of 1973 of $25,152,000 with subsequent additions stated at cost. If the following re-valued assets of the Group and Company have been included in the financial statements at cost less 58,016 58,589 26,387 27,026 accumulated depreciation, the net written down value would have been: Group and Company Joint venture 2004 2003 Unquoted shares, at cost 250 250 - - $’000 $’000 Share of net post-acquisition reserves 931 (139) - - Docks and quays 6,493 6,741 1,181 111 - -
eport 2004 The re-valued net book value of docks and quays is $10,973,000 (2003: $11,392,000). Loans and advances to joint venture (b) Net book value of fixed assets acquired under hire purchase agreements as at balance sheet date amounted to $1,873,000 company, Note (c) 8,290 - - - (2003: $2,954,000) in respect of the Group only. 9,471 111 - - (c) Others comprise motor vehicles, furniture and office equipment, utilities and fittings and computer equipment. 67,487 58,700 26,387 27,026
154 155
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
12. Associated companies and joint venture (con’t)
(a) Goodwill on acquisition 13. Other long term investments Group Company 2004 2003 2004 2003 Group Company $’000 $’000 $’000 $’000 2004 2003 2004 2003 $’000 $’000 $’000 $’000 Cost Quoted equity securities, Note (a) 16,547 4,483 15,749 4,483 Balance at 1 January and 31 December 15,982 15,982 - - Unquoted bonds, at cost, Note (b) - 60,000 - 60,000 Unquoted equity securities, at cost, Note (c) 6,872 6,855 3,109 3,109 Accumulated amortisation Unquoted non-equity securities, Note (d) 247 247 247 247 Balance at 1 January 9,768 6,660 - - Club memberships, Note (e) 187 191 122 126 Charge for the year - 3,108 - -
Balance at 31 December 9,768 9,768 - - 23,853 71,776 19,227 67,965
Net book value 6,214 6,214 - - Market value of club memberships 187 191 122 126
Market value of quoted securities 46,604 8,409 45,796 8,409 (b) Loans and advances to associated companies
Loans and advances to associated companies are stated after deducting provision for impairment in value of (a) Quoted equity securities are stated at cost and after deducting allowance for impairment in value analysed as $2,574,000 (2003: $2,134,000). follows:
Group Company Group Company 2004 2003 2004 2003 2004 2003 2004 2003 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Balance at 1 January - - 2,134 1,769 Balance at 1 January - 1,391 - 1,391 Charge for the year - - 440 365 Write-back for the year - (1,391) - (1,391) Balance at 31 December - - 2,574 2,134 Balance at 31 December - - - -
The loans and advances to associated companies are unsecured, interest free and is not expected to be repaid within the next twelve months. (b) In 2003, the Group held unquoted bonds which expire in 2009. The bonds’ effective interest rate is 7.25% per annum up to February 2004, and from March 2004 to 2009, 7.50% per annum. The Group’s associated companies are set out in Note 37. The unquoted bonds was disposed during the year. The Group’s share of results and balance sheet of the joint venture are as follows: Group (c) Included in unquoted equity securities is investment in unquoted Class B redeemable preference shares of Sabine 2004 2003 Industries Inc., a former joint venture held by a subsidiary company. These shares have no voting rights and are $’000 $’000 redeemable on demand. The holders are entitled to receive quarterly cumulative dividends at the rate of 12% (2003: Results of the joint ventures: 12%) per annum. On redemption, the preference shares will be converted into a promissory note that will bear Revenue 1,878 5,897 interest at 6% (2003: 6%) per annum. Expenses (808) (5,824) (d) The indicative fair value of the unquoted non-equity securities at 31 December 2004 was $335,000 (2003: $338,000). Profit before taxation 1,070 73 Unquoted non-equity securities are stated at cost and after deducting allowance for impairment in value of $1,753,000
eport 2004 (2003: $1,753,000) analysed as follows: Balance sheet of the joint venture: Non-current assets 8,363 1,325 Group Company Current assets 1,817 382 2004 2003 2004 2003 Current liabilities (886) (1,596) $’000 $’000 $’000 $’000 Non-current liabilities (8,113) - Balance at 1 January and 31 December 1,753 1,753 1,753 1,753 Net assets 1,181 111
156 157
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Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
13. Other long term investments (cont’d)
(e) Club memberships are stated at cost and after deducting provision for impairment in value of $653,000 (2003: With the exception of $4,177,000 (2003: $4,597,000) and $2,305,000 (2003 : $4,597,000) respectively for the $649,000) for the Group and $468,000 (2003: $464,000) for the Company analysed as follows: Group and Company, all the debts due from external parties are interest-bearing with interest rates for the Group and the Company ranging from 2.4% to 6% (2003: 2.4% to 6%) per annum and 4.375% to 6% (2003: 4.375% Group Company to 6%) respectively. 2004 2003 2004 2003 Group Company $’000 $’000 $’000 $’000 2004 2003 2004 2003 Balance at 1 January 649 358 464 263 $’000 $’000 $’000 $’000 Charge for the year 4 291 4 201 (c) Lease receivables Related companies 5,390 5,169 4,271 4,094 Balance at 31 December 653 649 468 464 External parties - 190 - -
Total under “Current assets”, Note (a) 5,390 5,359 4,271 4,094 14. Trade debtors Group Company 2004 2003 2004 2003 Related companies under 51,437 56,827 46,060 50,331 $’000 $’000 $’000 $’000 “Long term trade debtors”, Note (b) Trade debtors under “Current assets”, Note (a) 276,011 221,891 71,449 82,091 Under the terms of the lease agreements, no contingent rents are recognised. Interest rates for the Group and the Less: Allowance for doubtful debts (8,774) (11,436) (651) (651) Company ranged from 4% to 4.25% (2003: 4% to 18%) per annum and 4% (2003: 4%) per annum respectively. These lease receivables relate to the leases of marine vessels which the lessees have the option to purchase the 267,237 210,455 70,798 81,440 marine vessels during the term of the leases. Additional information on lease receivables are set out in paragraph (d).
Long term trade debtors, Note (b) 83,249 168,639 56,000 66,786 (d) Additional information on lease receivables: Minimum Estimated Total gross Unearned Present value 350,486 379,094 126,798 148,226 Group lease residual investment interest of minimum 2004 payment value in lease income lease payment (a) Current assets $’000 $’000 $’000 $’000 $’000 Associated companies 428 7,138 9 - Related companies 11,271 6,724 202 - Receivable within 1 year 7,686 - 7,686 (2,296) 5,390 Related parties 444 979 - - Receivable after 1 year but within 5 years 28,030 3,000 31,030 (6,632) 24,398 Subsidiary companies - - 59,948 70,820 Receivable after 5 years 25,313 4,500 29,813 (2,774) 27,039 Joint venture company - 724 - - External parties 258,478 200,967 7,019 7,177 61,029 7,500 68,529 (11,702) 56,827 Lease receivables, Note (c) 5,390 5,359 4,271 4,094 2003 276,011 221,891 71,449 82,091 Receivable within 1 year 7,887 - 7,887 (2,528) 5,359 Receivable after 1 year but within 5 years 29,389 3,000 32,389 (7,663) 24,726 Allowance for external party Receivable after 5 years 31,642 4,500 36,142 (4,041) 32,101 doubtful debts Balance at 1 January 11,436 16,421 651 6,413 68,918 7,500 76,418 (14,232) 62,186 Write-back for the year (1,415) (1,811) - (2,681) Bad debts written off (1,247) (3,177) - (3,081) Company Acquisition of subsidiary company - 3 - - 2004 Receivable within 1 year 6,328 - 6,328 (2,057) 4,271 8,774 11,436 651 651 Receivable after 1 year but within 5 years 25,313 - 25,313 (6,292) 19,021 Receivable after 5 years 25,313 4,500 29,813 (2,774) 27,039 Bad debts written off directly to 56,954 4,500 61,454 (11,123) 50,331 eport 2004 profit and loss account 415 72 - -
(b) Long term trade debtors 2003 External parties 31,812 111,812 9,940 16,455 Receivable within 1 year 6,328 - 6,328 (2,234) 4,094 Lease receivables from related Receivable after 1 year but within 5 years 25,313 - 25,313 (7,083) 18,230 companies, Note (c) 51,437 56,827 46,060 50,331 Receivable after 5 years 31,642 4,500 36,142 (4,041) 32,101
83,249 168,639 56,000 66,786 63,283 4,500 67,783 (13,358) 54,425
158 159
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
15. Goodwill on consolidation Group Group 2004 2003 2004 2003 $’000 $’000 $’000 $’000 (b) Work-in-progress Cost Costs and attributable profits less allowance for foreseeable losses 1,453,779 931,034 At 1 January 5,998 3,245 Less: Progress billings (1,128,548) (692,862) Additions 27 2,753 Amount written off (465) - 325,231 238,172
At 31 December 5,560 5,998 (c) Analysis of allowance for foreseeable losses: Balance at 1 January 282 300 Accumulated amortisation/impairment Charge to profit and loss account - 282 At 1 January 2,383 1,123 Amount written off - (300) Charge for the year - 1,260 Amount written off (175) - Balance at 31 December 282 282
At 31 December 2,208 2,383 17. Other debtors Net book value Group Company At 31 December 3,352 3,615 2004 2003 2004 2003 $’000 $’000 $’000 $’000 Amortisation and impairment of goodwill on consolidation are included in the line “General and administrative expenses” Deposits and recoverables, Note (a) 22,569 51,635 1,108 3,300 on the profit and loss account. Non-trade receivables, Note (b) 10,649 42,671 51,913 87,160 Prepayments 2,320 2,630 23 - 16. Stocks and work-in-progress Staff loans, Note (c) 3,543 3,516 29 19 Group 2004 2003 39,081 100,452 53,073 90,479 $’000 $’000 Cost (a) Deposits and recoverable Cash collateral - 3,710 - - Materials, Note (a) 59,189 15,918 GST refundable 15,063 6,087 - - Finished goods, Note (a) 6,520 1,882 Interest receivable - 799 - 357 Work-in-progress, Note (b) 325,231 238,172 Recoverable amount 4,311 36,797 216 585 Tax recoverable 118 1,529 - 1,410 390,940 255,972 Sundry deposits 3,077 2,713 892 948
(a) Stocks at cost are stated after deducting allowance 22,569 51,635 1,108 3,300 for stock obsolescence of:
Materials 705 745 In 2003, the cash collateral pertains to deposits placed with certain insurance companies to obtain performance Finished goods 167 150 bonds for construction contracts and bears interest of 0.86% per annum.
872 895 In 2003, recoverable amount for the Group includes $31,704,000 in respect of financing provided to a vessel repaired.
eport 2004 It carried an interest rate at 4% per annum and this receivable together with the trade receivable of $20,933,000 is Analysis of allowance for obsolete stocks: secured by the first legal mortgage over the vessel repaired. During the year, these balances were reclassified as Balance at 1 January 895 746 “Asset held for Sale’, see Note (d) below. Charge to profit and loss account 108 192 Stocks written off (131) (43) Recoverable amount for the Group also includes $821,000 (2003: $1,093,000) which bears interest of 4% to 8% (2003: 1.02% to 4%) per annum. Balance at 31 December 872 895
160 161
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
17. Other debtors (cont’d)
(b) Non-trade receivables 20. Other creditors and provisions Group Company Group Company 2004 2003 2004 2003 2004 2003 2004 2003 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Associated companies 1 939 - 938 Accrual for unconsumed leave 5,272 4,566 169 150 Joint venture - 1,164 - - Deposits received 519 512 26 31 Related company 10,648 17,773 - - GST payables 2,138 1,070 5 92 Subsidiary companies - - 51,913 81,426 Hire purchase creditors (Note 24) 1,365 1,230 - - External parties Non-trade payables, Note (a) 12,248 10,021 860 922 - sale of fixed asset - 4,796 - 4,796 Provisions for warranty, Note (b) 1,632 3,944 - - - sale of a joint venture - 17,999 - - Interest payable 1,184 - 1,184 -
10,649 42,671 51,913 87,160 24,358 21,343 2,244 1,195
All amounts are repayable on demand. (a) Non-trade payables Associated companies 183 779 33 33 All amounts due from associated and subsidiary companies and joint venture are unsecured and interest-free and Subsidiary companies - - 1 1 comprise mainly advances and payments on behalf. Related company 3,504 1,501 - - External parties 8,561 7,741 826 888 The related company balances are interest bearing unsecured fixed deposits which bear interest ranging from 0.22% to 2.405% (2003: 0.335% to 1.03%) per annum. Advances to and payments on behalf of subsidiary companies are 12,248 10,021 860 922 unsecured and also interest-free.
The amount due from external party on the sale of a joint venture is repayable in three instalments and will be fully With the exception of unsecured interest bearing amounts owing to a related company of $3,504,000 repaid by 31 December 2004. (2003: $1,501,000) with interest ranging from 1.29% to 1.37% (2003: 0.4375% to 0.65%) per annum, the other non-trade amounts payable to the associated and subsidiary companies and related parties are unsecured and (c) Staff loans bear interest at 3.00% (2003: 3.00%) per annum. interest free. All amounts are payable on demand. Group (d) Asset held for sale 2004 2003 The asset held for sale is a vessel which was acquired in June 2004 when the Company exercised its rights as $’000 $’000 mortgagee to take possession of asset when the owners defaulted on their payment under financing term (b) Provision for warranty granted in respect of the vessel’s repairs. The legal title of this vessel was transferred to a subsidiary company Balance at 1 January 3,944 4,996 upon the possession of this vessel. Writeback to profit and loss account (2,312) (333) Amounts utilised - (719) 18. Fixed deposits In 2003, included in the fixed deposit balances are fixed deposits of $54,379,000 pledged with a bank for banking Balance at 31 December 1,632 3,944 facilities of a subsidiary company. During the year, the pledge on the fixed deposits has been removed.
19. Trade creditors 21. Progress billings in excess of work-in-progress Group Company Group 2004 2003 2004 2003 2004 2003 $’000 $’000 $’000 $’000 $’000 $’000 Associated companies 3,032 10,920 - - Costs and attributable profits 213,983 20,695 Immediate holding company 34 995 - 900 eport 2004 Less: Progress billings (350,397) (40,267) Related companies 5,930 5,405 145 145 Related parties 1,741 823 - - Progress billings in excess of work-in-progress (136,414) (19,572) Subsidiary companies - - 21 33 External parties 463,906 355,282 5,901 4,257
474,643 373,425 6,067 5,335
162 163
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Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
22. Borrowings 23. Deferred taxation Group Company Group Company 2004 2003 2004 2003 2004 2003 2004 2003 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Non-current Liabilities Balance at 1 January 47,678 42,775 31,781 32,201 Medium term notes, unsecured, due after (Write-back)/charge for the year (1,270) 4,568 (3,644) (420) 1 year but within 5 years, Note (a) 149,645 - 149,645 - Acquisition of subsidiary company 102 335 - -
Current Liabilities Balance at 31 December 46,510 47,678 28,137 31,781 Bank loans, unsecured, Note (b) - 101,029 - 30,000
Total borrowings 149,645 101,029 149,645 30,000 Deferred taxation recognised arises as a result of: Group Company (a) During the year, the Company established a $500,000,000 Multicurrency Multi-issuer Debt Issurance Programme 2004 2003 2004 2003 $’000 $’000 $’000 $’000 (the “MTN”) pursuant to which the Company, together with its subsidiaries Jurong Shipyard Pte Ltd and Sembawang Shipyard Pte Ltd (“Issuing Subsidiary Companies”), may from time to time issue the Notes (as defined below). The Deferred tax liabilities obligations of Issuing Subsidiary Companies under the Notes will be fully guaranteed by the Company. Differences in depreciation 48,197 47,584 28,137 31,781 Other deferred tax liabilities 4,218 2,741 - - Under the MTN, the Company or any of the Issuing Subsidiary Companies may from time to time issue notes in 52,415 50,325 28,137 31,781 series or tranches in Singapore dollars and/or any other currency. Deferred tax assets The terms for the 1st series of $150,000,000 5-year fixed rate notes issued by the Company on 27 September Allowance for doubtful debts (803) (1,142) - - 2004, is redeemable at par on 26 September 2009 and bears fixed interest rate of 3.0% per annum and is listed Unutilised tax losses, capital allowance and on the Singapore Exchange Securities Trading Limited and will be cleared through the Central Depository investment allowance likely to be utilised (4,226) (702) - - (Pte) Ltd. Employee benefits (775) (710) - - Group Company Other deferred tax assets (101) (93) - - 2004 2003 2004 2003 $’000 $’000 $’000 $’000 (5,905) (2,647) - - MTN borrowings 150,000 - 150,000 - Capitalised issue expenses (355) - (355) - 46,510 47,678 28,137 31,781
Net borrowings 149,645 - 149,645 - Analysed into: Deferred tax asset (1,470) - - - Capitalised issue expenses Deferred tax liability 47,980 47,678 28,137 31,781 Amount paid 375 - 375 - Amortised during the year (20) - (20) - 46,510 47,678 28,137 31,781
355 - 355 - Deferred taxation not recognised as a result of: Group (b) In 2003, the details of the unsecured bank loan were as follows: 2004 2003 (i) Unsecured bank loan of the Company for $30,000,000 is repayable on 21 January 2004 and bears interest $’000 $’000 of 0.98% per annum. Deferred tax (assets)/liabilities Differences in depreciation - 263 (ii) Unsecured bank loans of a subsidiary company totalling $50,000,000 comprise four loans of $15,000,000, Doubtful debts (1,046) (1,087) $5,000,000, $5,000,000 and $25,000,000 repayable on 9 January 2004, 15 January 2004, 29 January Unutilised tax losses, capital allowance and investment allowance eport 2004 2004 and 29 January 2004 respectively and bear interest ranging from 0.91% to 0.98% per annum. likely to be utilised (16,812) (17,002) Other deferred tax liabilities - 7 The unsecured bank loans of a subsidiary company totalling $8,000,000 comprise three loans of $5,000,000, $1,000,000 and $2,000,000 repayable on 9 January 2004, 9 January 2004 and 16 January 2004 respectively (17,858) (17,819) and bear interest ranging from 1.58% to 1.62% per annum.
(iii) The unsecured bank loan of a subsidiary company totalling USD7,625,000 is repayable on 30 January 2004 Deferred tax assets have not been recognised because it is not probable that future taxable profit will be available and bears interest of 1.519% per annum. against which the subsidiary companies can utilise the benefit therefrom. 164 165
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
24. Hire purchase creditors 26. Share capital Present value Group and Company Minimum Unearned of minimum 2004 2003 Group lease payment interest income lease payment $’000 $’000 2004 $’000 $’000 $’000 Authorised: Payable after 1 year but within 5 years 370 (37) 333 5,000,000,000 ordinary shares of $0.10 each 500,000 500,000 Payable within 1 year, under “Other creditors and provisions” (Note 20) 1,438 (73) 1,365 Issued and fully paid up ordinary shares: Balance at 1 January 1,808 (110) 1,698 1,420,051,880 (2003: 1,414,322,480) shares of $0.10 each 142,005 141,432
2003 Issued during the year Payable after 1 year but within 5 years 1,216 (51) 1,165 Exercise of share options of 7,555,750 (2003: 5,729,400) Payable within 1 year, under “Other shares of $0.10 each 756 573 creditors and provisions” (Note 20) 1,338 (108) 1,230 Balance at 31 December 2,554 (159) 2,395 1,427,607,630 (2003: 1,420,051,880) shares of $0.10 each 142,761 142,005
The hire purchase agreements do not contain any escalation clauses and do not provide for contingent rents. The During the year, other than the issue of new shares upon the exercise of share options under the SembCorp Marine implicit interest rates range from 4.99% to 6.81% (2003: 4.42% to 6.81%) per annum. The net book value of assets Share Option Plan (the “Plan”) there was no other issue of new shares. acquired under hire purchase agreements is disclosed in Note 10. Lease terms do not contain restrictions concerning dividend, additional debt or further leasing. Share options were granted in 2004 (the “2004 Options”) pursuant to the Plan in respect of 16,168,000 unissued ordinary shares of $0.10 each to 1,146 full time executives of the Group, 9 Directors of the Company and 21 25. Other provisions executives and one non-executive director of the immediate holding company, SembCorp Industries Ltd, who are Group Company not substantial shareholders of the Company. In respect of options granted to executives and non-executive director 2004 2003 2004 2003 of the immediate holding company, a total of 283,000 options were granted during the financial year, making it a total $’000 $’000 $’000 $’000 of 1,553,000 options granted to those executives and non-executive director from the commencement of the Plan Provision for retirement gratuities, Note (a) 3,110 3,226 - - to the end of the financial year. The 2004 Options are exercisable from 11 August 2005 to 10 August 2014 Provision for restoration, Note (b) 3,895 - 2,895 - (11 August 2005 to 10 August 2009 for non-executive Directors of the Company) and the exercise price is $1.04 per share for cash. 7,005 3,226 2,895 -
(a) Provision for retirement gratuities Balance at 1 January 3,226 3,296 - - Utilised during the year (116) (70) - -
Balance at 31 December 3,110 3,226 - -
(b) Provision for restoration of fixed assets Provision made during the year and balance at 31 December 3,895 - 2,895 -
eport 2004
166 167
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Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
26. Share capital (cont’d)
The options granted, exercised and cancelled under the Plan during the year and the options outstanding at the end of the 28. Dividends year are as follows: (a) The proposed net dividend of $68,525,000 for 2004 (2003: $39,814,000) comprises:
Group and Company 1999 2000 2001 2002 2003 2004 2004 2003 Options Options Options Options Options Options $’000 $’000 Date options granted 10 Mar 1999 8 Sep 2000 27 Sep 2001 7 Nov 2002 8 Aug 2003 10 Aug 2004 A final dividend of 1.0 cent per share less tax of 20% Option exercise period: (2003: 1.0 cent per share less tax of 20%) 11,421 11,375 From 10 Mar 2001 8 Sep 2001 28 Sep 2002 8 Nov 2003 9 Aug 2004 11 Aug 2005 A final special dividend of 5.0 cents per share less tax of 20% To 9 Mar 2004 7 Sep 2010 27 Sep 2011 7 Nov 2012 8 Aug 2013 10 Aug 2014 (2003: 2.5 cents per share less tax of 20%) 57,104 28,439
Number of holders 68,525 39,814 at 31 December 2004 - 469 833 1,003 1,025 1,149 Exercise price per option $0.65 $0.70 $0.66 $0.90 $0.99 $1.04 (b) Dividend paid ’000 ’000 ’000 ’000 ’000 ’000 Interim dividend of 0.75 cents per share less tax of 20% (2003: 0.75 cents per share less tax of 22%) 8,534 8,292 Number of options Interim special dividend of 0.75 cents per share less tax of 20% outstanding: (2003: 0.75 cents per share less tax of 22%) 8,533 8,292 At 1 January 2004 404 8,523 10,218 15,199 15,450 - 2003 final dividend of 1.0 cent per share less tax of 20% Options exercised (72) (3,003) (2,496) (1,608) (378) - (2003: 2002 final dividend of 1.0 cent per share less tax of 22%) 11,375 11,051 Options granted - - - - - 16,168 2003 final special dividend of 2.5 cents per share less tax of 20% Options granted but (2003: 2002 final special dividend of 4.0 cents per share less tax of 22%) 28,439 44,206 not accepted - - - - - (116) Options cancelled (332) (89) (170) (406) (471) (68) 56,881 71,841
At 31 December 2004 - 5,431 7,552 13,185 14,601 15,984 29. Contingent liabilities Group Company 2004 2003 2004 2003 27. Reserves $’000 $’000 $’000 $’000 Group Company Bankers’ guarantees: 2004 2003 2004 2003 $’000 $’000 $’000 $’000 - secured by fixed deposits - 54,379 - - - unsecured - 115,879 - - Revenue reserve 586,502 548,381 417,377 419,744 Unsecured guarantees given to Share premium account 242,811 237,950 242,811 237,950 others in respect of: Foreign currency translation reserve (4,417) (2,566) - - - subsidiary companies - - 2,572,978 991,160 Asset revaluation reserve 960 960 960 960 Other capital reserves 283 397 - - 30. Commitments At year end, future commitments of the Group are as follows: 826,139 785,122 661,148 658,654 Group Company Made up of: 2004 2003 2004 2003 Distributable 586,502 548,381 417,377 419,744 $’000 $’000 $’000 $’000 Non-distributable 239,637 236,741 243,771 238,910 (a) Approved capital commitment: Amounts approved by Directors eport 2004 826,139 785,122 661,148 658,654 but not committed 2,889 154,924 - 153,810 Amounts approved and committed 172,580 - 170,080 -
175,469 154,924 170,080 153,810
168 169
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
30. Commitments (cont’d)
Group Company 32. Significant related party transactions 2004 2003 2004 2003 Significant transactions during the year between the Group and its related parties on terms as agreed between the $’000 $’000 $’000 $’000 respective parties and which are not otherwise disclosed in these financial statements consist of: (b) Foreign currency exchange contracts: Group Company Bought contracts 75,962 1,808 - - 2004 2003 2004 2003 Sold contracts 294,159 102,908 - - $’000 $’000 $’000 $’000 Related parties Sale of debt securities 54,280 - 54,280 - As at 31 December 2004, the Group had entered into foreign currency forward exchange buy contracts amounting Immediate holding company to $75,962,000 (2003: $1,808,000) and foreign currency forward exchange sell contracts amounting to Management fee payable 1,000 900 1,000 900 $294,159,000 (2003: $102,908,000). The fair value adjustments of the buy contracts and sell contracts (which is the difference between the notional principal amounts and market value of the contracts) resulted a net loss of Related companies $905,000 (2003: gain of $1,310,000) which was not adjusted in the financial statements. Sales 20,397 14,446 - - Purchases 28,604 24,689 - - (c) Minimum lease rental payable to JTC Corporation and a related company in respect of land and buildings: Rental payable 8,000 8,350 - - Joint venture and associated companies Group Company Sales 1,614 63,240 - - 2004 2003 2004 2003 Purchases 190,172 25,147 - - $’000 $’000 $’000 $’000 Within 1 year 18,768 17,607 7,040 6,637 33. Information by segment on Group operations After 1 year but within 5 years 74,098 91,229 38,830 54,057 Business segments After 5 years 24,766 25,115 5,394 12,618 The Group has 3 main business segments that are organised and managed separately according to their respective business activities. The 3 business segments are ship and rig repair, building and conversion, ship chartering and 117,632 133,951 51,264 73,312 others. The activities of these business segments are described in Note 1 and Note 37. Segment accounting policies are the same as the policies described in Note 2 with inter-segment sales and transfers carried out on an arm’s length basis. Segment assets consist primarily of fixed assets, current assets and exclude The leases do not contain escalation clauses and do not provide for contingent rents. Lease terms do not interest-bearing assets, inter-segment balances and tax assets. Segment liabilities comprise mainly of operating contain restrictions on the Group activities concerning dividends, additional debt or further leasing. liabilities and exclude interest-bearing liabilities, inter-segment balances and tax liabilities. (a) By business segment Certain leases include renewal options for additional lease period of 10 to 15 years and at rental rates based on Ship & rig repair, prevailing market rates. building and Ship conversion chartering Others Eliminations Total 31. Cash and cash equivalents $’000 $’000 $’000 $’000 $’000 Cash and cash equivalents included in the consolidated statement of cash flows comprise: 2004 Group Revenue 2004 2003 Sales to external parties 1,315,086 12,798 34,880 - 1,362,764 $’000 $’000 Inter-segment sales 230,873 178 140,497 (371,548) - Fixed deposits, bank and cash balances 469,484 202,786 Consolidated sales Less: Fixed deposits pledged with a bank for banking facilities 1,545,959 12,976 175,377 (371,548) 1,362,764 of a subsidiary company - (54,379) Results Segment results 74,439 12,745 6,669 - 93,853 469,484 148,407 Exceptional items (3,066) - - - (3,066) Investment and interest income 12,285 467 14 - 12,766
eport 2004 Interest expenses (2,822) - - - (2,822) Fixed deposits placed with financial institutions have maturity periods ranging from 1 day to 39 months Share of results of associated (2003: 1 days to 51 months) from the financial year-end. Interest rate of fixed deposits range from 0.25% to 5.12% companies & joint ventures 13,113 2,157 (1,992) - 13,278 (2003: 0.25% to 3.9%) per annum, which are also the effective interest rates. Profit before taxation 93,949 15,369 4,691 - 114,009 Taxation (14,859) (34) (1,097) - (15,990)
Profit after taxation 79,090 15,335 3,594 - 98,019
170 171
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
33. Information by segment on Group operations (cont’d)
Ship & rig repair, Ship & rig repair, building and Ship building and Ship conversion chartering Others Eliminations Total conversion chartering Others Eliminations Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 2004 Other segment assets 916,191 54,211 36,452 - 1,006,854 Other information Interest-bearing assets 439,831 14,167 4,034 - 458,032 Capital additions 87,402 - 1,150 - 88,552 Investment in associated Depreciation 34,589 1,685 1,225 - 37,499 companies & joint venture 53,830 580 4,290 - 58,700 Tax recoverable 1,411 - 118 - 1,529 Amortisation 20 - - - 20 Total segment assets 1,411,263 68,958 44,894 - 1,525,115 Other segment assets 1,228,684 4,838 38,095 - 1,271,617 Interest-bearing assets 498,791 10,449 9,433 - 518,673 Other segment liabilities 401,675 3,136 10,024 - 414,835 Investment in associated Interest-bearing liabilities 104,925 - - - 104,925 companies & joint venture 55,653 9,625 2,209 - 67,487 Deferred taxation 46,349 136 1,193 - 47,678 Deferred tax asset 1,463 - 7 - 1,470 Provision for taxation 15,036 57 711 - 15,804 Tax recoverable - - 118 - 118 Total segment liabilities 567,985 3,329 11,928 - 583,242 Total segment assets 1,784,591 24,912 49,862 - 1,859,365
Other segment liabilities 617,178 2,262 18,035 - 637,475 (b) By geographical area Interest-bearing liabilities 154,923 - - - 154,923 The Group operates in 10 (2003: 10) countries and principally in the Republic of Singapore. Pricing of inter- Deferred taxation 46,405 93 1,482 - 47,980 segment sales and transfers are carried out on an arm’s length basis. Provision for taxation 15,028 114 1,135 - 16,277 34. Directors’ remuneration Total segment liabilities 833,534 2,469 20,652 - 856,655 The remuneration of Directors of the Company fell within the following ranges: 2004 2003 2003 $500,000 and above 2 2 Revenue $250,000 to $499,999 - - Sales to external parties 1,016,839 19,618 31,529 - 1,067,986 Below $250,000 8 10 Inter-segment sales 174,377 23 41,388 (215,788) - 10 12 Consolidated sales 1,191,216 19,641 72,917 (215,788) 1,067,986
Results The Directors’ remuneration of the Company included an amount of $63,000 (2003: $307,000) relating to taxable Segment results 68,143 2,567 3,598 - 74,308 benefit arising from the exercise of share options during the year. This amount has not been charged to the profit and Exceptional items 1,478 - (203) - 1,275 loss account. Investment and interest income 13,438 815 10 - 14,263 Interest expenses (826) - (1,837) - (2,663) 35. Financial risk management objectives and policies Share of results of associated The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, liquidity risk companies & joint ventures 6,174 2,344 (515) - 8,003 and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks and they are summarised below: Profit before taxation 88,407 5,726 1,053 - 95,186 Taxation (17,518) (172) 729 - (16,961) Credit risk eport 2004 The Group has no significant concentration of credit risk with any single counter party and monitors its exposure to Profit after taxation 70,889 5,554 1,782 - 78,225 credit risks arising from sales to customers on an on-going basis where credit evaluations are done on customers that require credit. The Group only deals with pre-approved counterparties with good credit rating and imposes a Other information cap on the amount to be transacted with any counterparty so as to reduce its concentration of risk. Capital additions 32,494 1 132 - 32,627 Depreciation 29,617 2,783 1,545 - 33,945 The carrying amounts of investments, trade and other debtors and cash and cash equivalents represent the Group’s Amortisation 3,996 - 463 - 4,459 maximum exposure to credit risk.
172 173
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
35. Financial risk management objectives and policies (cont’d)
Foreign currency risk 37. Group companies The Group incurs foreign currency risk on purchases that are denominated in a currency other than Singapore Details of the Group’s subsidiary and associated companies are as follows: dollars, primarily the US dollar. To minimise exposure on foreign currency risks, the Group usually settles such Name of Company Principal Percentage of transactions within 30 days terms. (Country of activities equity held incorporation) (Place of business) Cost by the Group The Group also utilises forward exchange contracts with maturities of less than twelve months to hedge foreign 2004 2003 2004 2003 currency denominated financial assets, liabilities and firm commitments. Under this programme, increases or decreases $’000 $’000 % % in the Group’s foreign currency denominated financial assets, liabilities and firm commitments are partially offset by Subsidiary companies gains and losses on the hedging instruments. The Group does not use foreign currency forward contracts for trading Bulk Trade Pte Ltd Bulk trading 1,764 1,764 100 100 purpose. (Singapore) (Singapore)
Interest rate risk Dolphin Shipping Ship owning and chartering 500 500 100 100 The Group’s policy is to maintain an efficient optimal interest cost structure using a mix of fixed and variable rate Company Private Limited (Singapore) debts where working capital is financed by variable rate loans while long term investments are financed by fixed rate (Singapore) loans. Surplus funds, if any, are placed with reputable banks and/or investment in bonds. JPL Corporation Pte Ltd Investment holding 5,100 5,100 70 70 The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to (Singapore) (Singapore) obtain the most favourable interest rates available without increasing its foreign currency exposure. Jurong Clavon Pte Ltd Engineering work 594 (a) 55 (a) Liquidity risk (Singapore) (Singapore) Short-term funding is obtained from overdraft facilities and bank loans. Jurong Integrated Services Steel fabrication work 5,000 5,000 100 100 36. Fair value of financial instruments Pte Ltd (Singapore) (Singapore) The following methods and assumptions are used to estimate the fair value of each class of financial instruments for Jurong Machinery and Marine and general 2,000 2,000 100 100 which it is practicable to estimate that value: Automation Pte Ltd electronic and electrical (Singapore) works (Singapore) Cash and cash equivalents, debtors, creditors and short-term borrowings The carrying amounts of cash and cash equivalents, debtors and creditors (including related party balances which Jurong Marine Contractors Provision of contract 25 25 100 100 are expected to be repaid in accordance with normal credit terms), and short-term borrowings approximate their fair Private Limited (Singapore) services (Singapore) values due to the short term nature of these balances. Jurong Shipbuilders Investment holding 30,000 30,000 100 100 Related party balances Private Limited (Singapore) (Singapore) No disclosure of fair value is made for related party balances (including associated, related and subsidiary companies and any other related parties) which are in the nature of loans as it is not practicable to determine their fair values with Jurong Shipyard Pte Ltd Ship and rig repair, building, 50,000 50,000 100 100 sufficient reliability since these balances have no fixed terms of repayment although these are not expected to be (Singapore) conversion and related settled within twelve months from the balance sheet date. services (Singapore) Jurong SML Pte Ltd Shipbuilding, ship repair and 28,305 28,305 100 100 Unquoted equity investments and long term trade debtors (Singapore) related services (Singapore) Other than the disclosures made in Note 13 and Note 14, it is not practicable to determine the fair values of the remaining unquoted equity investments held as long term investments and the long term trade debtors carried at Karimun Shiprepair and Investment holding 22,565 22,565 100 100 cost. In the opinion of the Directors, the expected cash flows from these unquoted equity investments and long-term Engineering Pte Ltd (Singapore) trade debtors are believed to be in excess of their carrying amounts. (Singapore)
Hire purchase creditors PPL Shipyard Pte Ltd Rig building, repair and 30,276 30,276 85 85 The fair value of the hire purchase creditors is determined by discounting the relevant cash flow using current interest (Singapore) related services (Singapore) rate for similar instruments at balance sheet date. Sembawang Shipyard Ship repair and related 54,230 54,230 100 100 eport 2004 There are no significant differences between the fair values and the carrying amounts of the hire purchase creditors. Pte Ltd (Singapore) services (Singapore)
Unrecognised financial instruments Sembawang Shipyard (S) Investment holding 25,560 25,560 100 100 The valuation of financial instruments not recognised in the balance sheet reflects amounts which the Group expects to Pte Ltd (Singapore) (Singapore) pay or receive to terminate the contracts or replace the contracts at their current market rates at the balance sheet dates. SML Shipyard Pte Ltd Ship repair and related 12,000 12,000 100 100 (Singapore) services (Singapore) Other than the disclosure made in Note 30, there are no other unrecognised financial instruments. 267,919 267,325
174 175
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
37. Group companies (cont’d)
Name of Company Principal Percentage of Name of Company Principal Percentage of (Country of activities equity held (Country of activities equity held incorporation) (Place of business) Cost by the Group incorporation) (Place of business) by the Group 2004 2003 2004 2003 2004 2003 $’000 $’000 % % %% Associated companies Subsidiary companies of Karimun Shiprepair and Engineering Pte Ltd Cosco (Dalian) Shipyard Ship repair and 15,161 15,161 20 20 P.T. Karimun Sembawang Ship repair and related services 100 100 Co. Ltd ** related services Shipyard * (Indonesia) (Indonesia) (People’s Republic of China) (People’s Republic of China) Sinna Services Pte Ltd Ship repair and related services 100 100 Joint Shipyard Investment Investment holding 2,120 2,120 50 50 (Singapore) (Singapore) Pte Ltd ** (Singapore) (Singapore) Subsidiary companies of PPL Shipyard Pte Ltd Joint Shipyard Management Managing dormitories # # 25 25 Baker Marine Pte Ltd Rig enhancement and upgrading services, engineering 85 85 Services Pte Ltd (Singapore) (Singapore) (Singapore) consultancy and project management, and supply of rig equipment and parts (Singapore) Jurong Clavon Pte Ltd Engineering work (a) 200 (a) 50 (Singapore) (Singapore) Baker Marine Services (HK) Provision of rig designs 85 85 Limited * (Hong Kong) (Hong Kong) Jurong Marine Services ** Provision of tugging and sea 1,050 1,050 50 50 Pte Ltd (Singapore) transportation services Baker Marine Technology Inc. Engineering design, research and development, marketing 85 85 (Singapore) (United States of America) *** and client services support centre (United States of America) 18,331 18,531 Subsidiary and associated companies of Jurong Shipbuilders Private Limited
# less than $1,000 Jurong Shipping Company Inactive 100 100 Private Limited (Singapore) (Singapore) Name of Company Principal Percentage of (Country of activities equity held Jurong Shipping Company Inactive 100 100 incorporation) (Place of business) by the Group Beta Pte Ltd (Singapore) (Singapore) 2004 2003 %% Jurong Shipping Company Inactive 100 100 Subsidiary and associated companies of Sembawang Shipyard Pte Ltd Gamma Pte Ltd (Singapore) (Singapore) SES Marine Services (Pte) Ltd Marine services 100 100 (Singapore) (Singapore) Tridex Investment Inc. *** Investment holding 100 100 (British Virgin Islands) (British Virgin Islands) SES Engineering (M) Fabrication of metal structures 100 100 Sdn Bhd * (Malaysia) (Malaysia) Oslo Gas I LP *** Ship owning and chartering 33.3 33.3 (Republic of Liberia) (Norway) World Adventurer Pte Ltd Marine services 100 100 (formerly known as (Singapore) Oslo Gas II LP *** Ship owning and chartering 33.3 33.3 Sembawang Shipyard (Republic of Liberia) (Norway) Services (Pte) Ltd) (Singapore)
eport 2004
OmixAsia.com Pte Ltd E-commence & bulk procurement 30 30 (Singapore) (Singapore)
176 177
SembCorp Marine Ltd • Annual R Notes to the Notes to the
Financial Statements - 31 December 2004 Financial Statements - 31 December 2004 SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES
37. Group companies (cont’d)
Name of Company Principal Percentage of (b) Sembawang Shipyard (S) Pte Ltd (“SSSPL”) has granted an option to the minority shareholder (the “Minority (Country of activities equity held Shareholder”) of Kristiansand Drilling Pte Ltd (“Kristiansand”) (the “Call Option”) to acquire all (but not some only) incorporation) (Place of business) by the Group the shares of Kristiansand (the “Call Option Shares”) held by SSSPL. 2004 2003 %% The Call Option shall be exercisable at any time during the period commencing from the Effective Date as Subsidiary and associated companies of Jurong Shipyard Pte Ltd described in Shareholders’ Agreement to the date falling 18 months after date of delivery of a jack-up rig which Jurong Brazil-Singapore Investment holding 100 100 is owned by Kristiansand. Pte Ltd (Singapore) (Singapore) The exercise price of the Call Option shall be a sum equivalent to the Company’s actual paid in capital plus Jurong Shipyard Inc. *** Investment holding 35 35 financing costs of LIBOR + 1.5% per annum for the period from Effective Date to date of transfer of the Call (Bahamas) (Bahamas) Option Shares plus premium of 0% to 12% premium depending on the time the Minority Shareholder Exercises the Call Option. Maua Jurong S.A. ** Shipbuilding, ship repair, and conversion 35 35 (Brazil) (Brazil) The Minority Shareholder of Kristiansand has also been granted an option (the “Put Option”) to require SSSPL to acquire the Shares of Kristiansand (the “Put Option Shares”) held by them. Subsidiary companies of JPL Corporation Pte Ltd JPL Services Pte Ltd Equipment rental services and trading in copper slag 70 70 The Put Option shall be exercisable at any time during the period commencing from the Effective Date as (Singapore) (Singapore) described in Shareholders’ Agreement to the date falling 9 months after the date of delivery of the rig.
JPL Industries Pte Ltd Processing and distribution of copper slag 53.8 53.8 The exercise price for Put Option Shares shall be a sum equivalent to 90% of the Minority Shareholders’ actual (Singapore) (Singapore) paid in capital on the date of transfer of Put Option Shares.
JPL Concrete Products Production of concrete products 53.8 53.8 * Audited by other member firms of Ernst & Young ** Audited by other firms Pte Ltd (Singapore) (Singapore) *** These companies are not required to be audited under the laws of their country of incorporation
Subsidiary company of Sembawang Shipyard (S) Pte Ltd 38. Subsequent event Kristiansand Drilling Pte Ltd Rig owning and chartering 81.82 - The Company has injected a net cash consideration of RMB 240 million ($47.5 million) for the 30% equity stake in (Singapore), Note (b) (Singapore) Cosco Shipyard Group (“CSG”) based on the revalued net asset value of CSG. The Company’s existing 20% equity stake in Cosco (Dalian) Shipyard Co Ltd has also been revalued and transferred to the enlarged CSG as part of the Subsidiary and associated companies of Jurong Clavon Pte Ltd consideration for this 30% equity interest in CSG. Aswell (F.E.) Pte Ltd Dealers in blasting and painting equipment, accessories 55 (a) (Singapore) and consumable materials (Singapore) CSG is a leading ship repair and conversion group in People’s Republic of China. It owns five major shipyards that are strategically located in the key coastal cities of Dalian, Nantong, Shanghai, Zhoushan and Guangzhou. Cosco Shipyard Jurong Corrosion control 22 - Clavon Co., Ltd** (People’s Republic of China) 39. Comparative figures (People’s Republic of China) The following comparative figures relating to the previous year have been reclassified to conform with the presentation in the current year and to better reflect the nature of the profit and loss items. Joint venture company of Dolphin Shipping Company Private Limited Group Company Pacific Workboats Pte Ltd ** Ship leasing and marine surveying services 50 50 As restated As previously As restated As previously (Singapore) (Singapore) stated stated $’000 $’000 $’000 $’000 (a) Jurong Clavon Pte Ltd and its subsidiary companies is held by the Group as follows: Cost of sales (963,082) (966,068) _ _ 2004 2003 Other operating income 12,344 19,312 5,776 9,105
eport 2004 %% General and administrative expenses The Company 55 50 (42,940) (46,922) (2,797) (6,126)
The above transaction does not have a material impact on the results and financial position of the Group. 40. Authorisation of financial statements The financial statements of SembCorp Marine Ltd for the year ended 31 December 2004 were authorised for issue in accordance with a resolution of the Directors on 18 February 2005.
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SembCorp Marine Ltd • Annual R 181 2004 2003 $’000 $’000 of the SGX Listing Manual mandate pursuant to Rule 920 conducted under a shareholders’ Aggregate value of all transactions Aggregate - 31 December 2004 Transaction for the Sales of Goods and Services Transaction Keppel Corporation Ltd and its associatesNeptune Orient Lines Ltd and its associatesSembCorp Industries Limited and its associates of Goods and Services for the Purchase Transaction Keppel Corporation Ltd and its associatesNeptune Orient Lines Ltd and its associatesSembCorp Industries Limited and its associatesManagement and Support Services SembCorp Industries Limited 221 6,262 1,890 Person Transactions Interested Total Transactions Treasury Sale of Debt Securities Neptune Orient Lines Ltd 2,351 23,499 3,241 769 2,310 5,755 - as at 31 December Placement of Funds with/(from) SembCorp Industries Limited and its associatesSembCorp Industries Limited and its associates 2,104 22,946 5,612 37,533 1,000 10,648 41,327 (3,504) 900 17,773 (1,501) 54,280 - Supplementary Information AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD B. Person Transactions Interested - 2 8 10 2004 Number of share ^ mount has not been charged Fees option granted 1,740,000 255,200 Shares OutstandingShares Released Shares Aggregate ConditionalAggregate Conditional Aggregate Bonus Directors’ Total # - 37 83 120 250 $’000 $’000 $’000 $’000 ’000 Salary * - 31 December 2004 (deceased) to the profit and loss account. Names of Director Wong Kok Siew Wong Kwi KinTan Pheng HockTan Kiyotaka MatsuzawaNaoteru TsudaLow Sin Leng Han Tew Tan Ajaib Haridass 594Haruo Kubota - -Heng Chiang GneeCompany 348 ------361 - - 29 39 19 - 942 201 - 29 39 15 955 29 - - 700 15 68 605 48 - 50 100 57 17 68 562 337 57 - 50 17 1,897 150 400 130 30 1,860 $500,000 and above $250,000 to $499,999 Below 250,000 (b) the market value of 255,200 performance shares $220,748 awarded during year. ^ Relates to share options granted during the year by Company. A. Directors’ Remuneration A. Directors’ of the Company falls within following ranges:- of directors The remuneration *# all fees other than directors’ fee, and emolument. The salary amount shown is inclusive of allowances, CPF, (a) The bonus amount shown is inclusive of CPF and: This a the taxable benefit arising from exercise of share options during year amounting to $63,000 for Company. Summary compensation table for the year ended 31 December 2004 (Group): In addition, the following directors were conditionally awarded an aggregate of 1,740,000 performance shares: an aggregate conditionally awarded were In addition, the following directors Tan Kwi KinTan Heng Chiang Gnee 600,000 1,140,000 88,000 167,200 The actual number delivered will depend on the achievement of set targets over a 3-year period from 2002 to 2004, 2003 will depend on the achievement of set targets over a 3-year period from The actual number delivered will be delivered, to 2005 and 2004 2006. Achievement of targets below 80% level will mean no performance shares while achievement of targets exceeding 100% will mean up to a maximum 200% the conditional performance shares in 2004 for the performance period to the above directors released were 255,200 performance shares could be delivered. 2001 to 2003. Supplementary Information AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp This page has been intentionally left blank. workshops properties properties shipbuilding and rig building including drydock, berthage & workshops option for 30 years 10 years leasehold Ship repairs 10 years leasehold ship Ship repairs, 30 years leasehold and Ship repairing 2 2 2 2 2 Building, workshop,drydocks and quays 10 years renewal including drydock, berthage & and wharves years plus another Approximate Land Area Approximate per unit Building, workshop,drydocks and quays 10 years renewal conversion, offshore, with built-in area of 99m with built-in area - As at March 12, 2005 No. 15Jalan LambakKawasanPerindustrian and 3-storey Workshop Johor Taman 56,348 sq ft81200 Johor Bahru building office Freehold workshop Metal fabrication Hilton Towerat Grange Road of 131m built-in area Apartment with Freehold Residential Tanjong KlingTanjong 491,054.57m Land area: Indonesia Building, workshop with option for 20 fabrication Jalan Samulun 198,098m Land area: Karimun Island 150,000m Mendong Spring apartment 9 units of 3-room Freehold Residential SES Engineering Sdn Bhd Marine Sembawang Shipyard Held bySembCorp Location Description & Tenure Usage Karimun P.T. Major Properties AND SUBSIDIARY COMPANIES SEMBCORP MARINE LTD
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp 185 Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 Resolution 8 ”) that might or would Instruments ”) whether by way of rights, bonus or shares Annual General Meeting of the Company will be held on Thursday, nd ”)) for the purpose of determining the aggregate number of shares ”)) for the purpose of determining aggregate SGX-ST basis to shareholders of the Company (including shares to be issued in pursuance of of the Company (including shares basis to shareholders options or vesting of share awards which are outstanding or subsisting at the time this which are awards options or vesting of share Resolution is passed; and (i) of any convertible securities or share the conversion or exercise arising from new shares (ii) any subsequent consolidation or subdivision of shares; otherwise; and/or and issue of (as well as to be issued, including but not limited the creation shares require or other instruments convertible into shares, adjustments to) warrants, debentures Instruments made or granted pursuant to this Resolution) does not exceed 20% of the issued with sub-paragraph (2) below); capital of the Company (as calculated in accordance share Limited (“ Trading capital shall of issued share that may be issued under sub-paragraph (1) above, the percentage capital of the Company as at time this Resolution is passed, be based on the issued share after adjusting for: (ii) “ or options (collectively, agreements make or grant offers, at any time and upon such terms conditions for purposes to persons as deem fit; and may in their absolute discretion the Directors while this Resolution in pursuance of any Instrument made or granted by the Directors issue shares was in force, issued in pursuance of Instruments made or granted pursuant to this Resolution) does not with sub- capital of the Company (as calculated in accordance exceed 50% of the issued share to be issued other than on a number of shares paragraph (2) below), of which the aggregate pro rata provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance of the Listing Manual SGX-ST for time being in force provisions has been waived by the SGX-ST) and Articles of Association for time being Company; and (2) Exchange Securities by the Singapore (subject to such manner of calculation as may be prescribed (b) by this Resolution may have ceased to be in force) (notwithstanding the authority conferred (1) to be to be issued pursuant this Resolution (including shares number of shares the aggregate (3) by this Resolution, the Company shall comply with the authority conferred in exercising (a) Haruo Kubota (independent member of the Audit Committee) (b) Lua Cheng Eng (a) (i) in the capital of Company (“ issue shares of 5.0 cents per share less income tax for the year ended December 31, 2004. of 5.0 cents per share himself for re-election. Articles of Association and who, being eligible, will offer Articles of Association. Company’s themselves for re-election: Articles of Association and who, being eligible, will offer Company’s (2003: S$332,332) remuneration. Notice of Annual General Meeting (Incorporated in the Republic of Singapore) the 42 NOTICE IS HEREBY GIVEN THAT 628054 to transact the following business:- Kling Road, Singapore April 21, 2005 at 11.00 a.m. 29 Tanjong Ordinary Business 1 Report and Audited Accounts for the year ended December 31, 2004. and adopt the Directors’ receive To 2 less income tax and a special dividend the payment of a final dividend 1.0 cents per share approve To 3 pursuant to Article 91 of the Company’s by rotation Mr Kiyotaka Matsuzawa, who will retire re-elect To 4 pursuant to Article 91 of the by rotation retiring of Ms Low Sin Leng, a Director the retirement record To 5 pursuant to Article 97 of the each of whom will cease to hold office the following Directors, re-elect To that: provided 6 Fees for the year ended December 31, 2004. the sum of S$337,000 as Directors’ approve To 7 to fix their as Auditors of the Company and authorise Directors Messrs Ernst & Young re-appoint To Special Business Resolutions:- as Ordinary which will be proposed consider and, if thought fit, to pass the following resolutions To 8 of the Company to: given to the Directors That authority be and is hereby This page has been intentionally left blank.
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp PROXY FORM ny of (Address) . Annual General nd Shareholdings (%) Shareholdings For Against FOR INFORMATION ONLY FOR INFORMATION set out in the Notice of Annual General l on any other matter arising at the Annual (expressed as a percentage of the whole) to be as a percentage (expressed the instrument appointing a proxy or proxies shall be or proxies the instrument appointing a proxy should insert the aggregate number of shares entered number of shares should insert the aggregate ours before the time appointed for holding Annual ours before s, you should insert that number of shares. If you have s, you should insert that number of shares. ks fit to act as its representative at the Annual General ks fit to act as its representative attend and vote instead of him. Such proxy need not be attend and vote instead of him. Such proxy d. iting. Where the instrument appointing a proxy or proxies is or proxies the instrument appointing a proxy iting. Where (as defined in Section 130A of the Companies Act, Chapter entered against his name in the Depository Register as at 48 entered the Company. or illegible or where the true intentions of the appointor are not the true intentions of appointor are or illegible where the case of shares entered in the Depository Register, the Company in the Depository Register, entered the case of shares for all intents and purposes if used or purported to be by them. Ltd’s shares, this document is forwarded to them at the request of their Ltd’s CPF Approved Nominees solely 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective IMPORTANT 1. For investors who have used their CPF monies to buy SembCorp Marine PROXY FORM Ordinary Business Ordinary Special Business Plans Share with SembCorp Marine’s in accordance (Name) 123 Report and Accounts Adoption of Directors’ 4 Declaration of Final Dividend and Special 5 Re-election of Kiyotaka Matsuzawa 6 Re-election of Haruo Kubota 7 Re-election of Lua Cheng Eng Fees of Directors’ Approval 8 Re-appointment of Auditors 9 Issue Mandate of Share for the renewal Approval and issue shares to grant options and/or awards Authority for Directors represented by each proxy. represented General Meeting. or attorney duly authorise executed by a corporation, it must be either under its seal or the hand of an officer with its Articles of Association and Section 179 the Companies Act, Chapter 50 Singapore. Meeting in accordance a member of the Company. deemed to relate to all the shares held by you. to all the shares deemed to relate 50 of Singapore), you should insert that number of shares. If you have shares registered in your name the Register of Member registered If you have shares you should insert that number of shares. 50 of Singapore), in your name the Register of Members, you registered against your name in the Depository Register and shares entered shares in your name the Register of Members. If no number is inserted, against your name in the Depository Register and registered No. Resolutions Nameand/or (delete as appropriate) Address NRIC/Passport Number of Proportion Meeting of the Company to be held at 29 Tanjong Kling Road, Singapore 628054 on Thursday, April 21, 2005 at 11.00 a.m. and a 628054 on Thursday, Kling Road, Singapore Meeting of the Company to be held at 29 Tanjong adjournment thereof. hours before the time appointed for holding Annual General Meeting, as certified by The Central Depository (Pte) Limited to hours before 4. 179360, not less than 48 h #05-04, Singapore must be deposited at 30 Hill Street or proxies The instrument appointing a proxy 5. must be under the hand of appointor or his attorney duly authorised in wr or proxies The instrument appointing a proxy 6. or other governing body such person as it thin of its directors A corporation which is a member may authorise by resolution General: completed if it is incomplete, improperly or proxies the instrument appointing a proxy The Company shall be entitled to reject In addition, in or proxies. the instructions of appointor specified in instrument appointing a proxy ascertainable from is not shown to have shares being the appointor, lodged if the member, or proxies any instrument appointing a proxy may reject 3. of his shareholding the appointments shall be invalid unless he specifies proportion a member appoints two proxies, Where 2. to A member of the Company entitled to attend and vote at a meeting is appoint one or two proxies I/We appoint:- hereby being a member/members of SEMBCORP MARINE LTD to demand a poll, at the 42 to attend and vote for me/us on my/our behalf and, if necessary, as my/our proxy/proxies whether you wish your vote(s) to be cast for or against the Resolutions as (Please indicate with an “X” in the spaces provided will vote or abstain as he/they may think fit, wil the proxy/proxies Meeting. In the absence of specific directions, General Meeting.) Signature(s) of Member(s) or Common Seal Notes: 1. against your name in the Depository Register entered held by you. If you have shares Please insert the total number of shares Dated this day of 2005. Held Number of Shares Total (INCORPORATED IN THE REPUBLIC OF SINGAPORE) (INCORPORATED ital of the llectively, the llectively, Resolution 9 to May 3, 2005, both 5, up to 5 p.m. on April ector. foresaid, members whose foresaid, pore 179360 not later than pore of share awards which are awards of share as warrants or debentures) s at 5.00 p.m. on the Book e issued share capital of the e issued share proxies to attend and vote on proxies t Resolution 8 is passed, after s. the Company pursuant to tle received by the Company’s tle received ”); and esented by each proxy. A proxy esented by each proxy. ”) and/or the Share Plans Share ”) (the Share Option Plan, ”) (the Share Performance Share Plan Performance Share Restricted Stock Plan basis to shareholders. For the purpose of determining the aggregate number of shares that number of shares For the purpose of determining aggregate basis to shareholders. pro rata ”) and/or to grant awards in accordance with the provisions of the with the provisions in accordance ”) and/or to grant awards Annual General Meeting, will be paid on May 18, 2005. nd Share Option Plan Share the Performance Share Plan and the Restricted Stock Plan, together “ the Performance Share SembCorp Marine Restricted Stock Plan (the “ Resolution shall continue in force until the conclusion of next Annual General Meeting Resolution shall continue in force by Company or the date by which next Annual General Meeting of is required law to be held, whichever is the earlier. Plan (the “ Plan (the “ SembCorp Marine Performance Share Company as may be required to be issued pursuant to the exercise of options under the Share to be issued pursuant the exercise Company as may be required to be issued pursuant as may be required Option Plan and/or such number of fully paid shares Plan and/or the Restricted Stock Plan, under the Performance Share to the vesting of awards ”) provided that the aggregate number of shares issued pursuant to the Share Plans shall not exceed 15% of the issued share cap Plans shall not exceed 15% of the issued share issued pursuant to the Share number of shares that the aggregate ”) provided (4) by this or varied by the Company in General Meeting) authority conferred (unless revoked (a) Option of the SembCorp Marine Share with the provisions and grant options in accordance offer (b) of $0.10 each in the capital time to such number of shares allot and issue from Plans shall not to be issued pursuant the Share number of shares that the aggregate provided time to time. capital of the Company from exceed 15% of the issued share Share Plans Share adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of any convertible securities or share the conversion or exercise arising from adjusting for (a) new shares outstanding or subsisting at the time that Resolution 8 is passed, and (b) any subsequent consolidation subdivision of share in the capital of and to issue shares and grant options and/or awards to offer Resolution 9 - is to empower the Directors Plan and the SembCorp Marine Restricted Stock (co Option Plan, the SembCorp Marine Performance Share SembCorp Marine Share “ Company for the time being. Note: than two (2) A member of the Company entitled to attend and vote at Annual General Meeting is appoint not more to be repr of his shareholdings he shall specify the proportion than one (1) proxy, a member appoints more his behalf and where #05-04 Singa must be lodged at 30 Hill Street or proxies The instrument appointing a proxy need not be a member of the Company. the time of meeting. 48 hours before and Dividend Payment Date Notice of Books Closure April 29, 2005 Books of the Company will be closed from Transfer NOTICE IS HEREBY GIVEN that the Register of Members and Share of dividend warrants. dates inclusive, for the preparation documents of ti in the capital of Company together with all relevant shares of ordinary Duly completed transfers in respect 17936 & Industry Building Singapore #06-02, Chinese Chamber of Commerce Kon Choon Kooi Pte Ltd, 47 Hill Street Registrar, Share dividend. Subject as a to determine members’ entitlements the proposed Date”) will be registered 28, 2005 (the “Book Closure in the capital of Company a shares with ordinary credited securities accounts with The Central Depository (Pte) Limited are Date will be entitled to the dividend. Closure at the 42 dividend, if approved The proposed Notice of Annual General Meeting (Incorporated in the Republic of Singapore) 9 to: given to the Directors be and is hereby That approval Explanatory Notes: as the member of Audit Committee. Haruo Kubota is an independent Dir Haruo Kubota will remain Resolution 4 – if re-elected, capital of the Company at time tha capital shall be based on the issued share of issued share may be issued, the percentage Statement pursuant to Article 54 of the Articles Association Company: in the capital of Company and to make or grant instruments (such to issue shares Resolution 8 – is to empower the Directors in pursuance of such instruments, up to an amount not exceeding total 50% th and to issue shares convertible into shares, with a sub-limit of 20% for issues other than on Company, 10 transact any other business. To of the Board By Order Kwong Sook May Company Secretary April 6, 2005
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eport 2004 eport SembCorp Marine Ltd • Annual R Annual • Ltd Marine SembCorp Affix Postage Stamp
The Company Secretary SembCorp Marine Ltd c/o 30 Hill Street #05-04 Singapore 179360