Sembcorp Marine Ltd (OTCPK:SMBMF) Q2 2022 Earnings Conference Call August 11, 2022 10:00 PM ET
Company Participants
Mun Yuen – Investor Relations and Corporate Communications
Wong Weng Sun – President and Chief Executive Officer
William Goh – Group Finance Director
Conference Call Participants
Operator
Mun Yuen
Ladies and gentlemen, good morning and welcome to Sembcorp Marine First Half 2022 Results Presentation Webcast. I am Mun Yuen from Semb Marine Investor Relations and Corporate Communications. Thank you again for taking time to joining us this Friday morning. Given that we are still in the week of our nation’s birthday, I’d like to wish all a Happy National Day.
Before we commence the webcast, may I remind all that some of the statements made on the call today could be forward-looking in nature. A detailed disclaimer in this regard has been included in the press release.
On the call today, we have Mr. Wong Weng Sun, President and CEO of Sembcorp Marine. He is joined by Mr. William Goh, Group Finance Director of Sembcorp Marine.
Well, without further delay, I’d like to invite Mr. Wong to address the meeting. Mr. Wong, please.
Wong Weng Sun
Good morning, everyone. Thank you for joining us at Sembcorp Marine first half 2022 results webcast. In the first half of 2022, we achieved successive delivery of seven projects from February, culminating in the delivery of Transocean Deepwater Atlas, the world’s first eighth generation ultra-deepwater drillship designed and built by Sembcorp Marine.
Deepwater Atlas feature 3 million pound hook load hoisting capacity and well control system to execute 20,000 psi drilling operations and breakthrough drilling depth of 40,000 feet on top of 12,000 feet of water depth. This marks a new milestone in the offshore construction for Sembcorp Marine and our nation.
Strong execution by team SCM has enabled us to achieve successive project completions and deliveries to date. The measures we have put in place to mitigate and the impact of residual COVID-19 challenges have also enabled smoother execution of projects. The overall operational and financial performance of the group improved significantly year-on-year.
The group recorded revenue of S$1.1 billion for the six months ended June 30, 2022, an increase of 30% compared to the corresponding period in the prior year. While the group reported a net loss of S$143 million for the first half of 2022, this is a 78% reduction from the net loss of the corresponding period in 2021.
In first half 2022, we secured S$1.9 billion of new orders and our net order book crossed S$2.5 billion as at end first half of 2022. William Goh, our Group Finance Director will provide more details on our financial performance shortly.
Let me now share about our operation and our operating environment. For the successful delivery of projects, apart from Deepwater Atlas, which I mentioned earlier, Sembcorp Marine successfully completed and delivered six other key projects. They are: fabrication of six production topsides and four bridges for TotalEnergies Tyra Redevelopment Project; newbuild FPSO Johan Castberg for Equinor; newbuild FPSO Energean Power for Technip Energies; 15 turbine jacket foundations for Jan De Nul for installation at the Formosa 2 Offshore Wind Farm in the Taiwan Strait; Offshore Substation and Reactive Compensation Station for Orsted Hornsea 2 Offshore Wind Farm in the UK North Sea; and FSRU conversion of Karmol LNGT Powership Asia.
Besides this, the group’s repair and upgrade business continued to see improvement in demand, and year-to-date, we have serviced 96 vessels. For the ongoing project execution, we have five more projects scheduled for completion by end of this year and another seven projects, which will progressively be delivered from 2023 to 2026.
Key projects under execution include: Renewables Solutions, Sofia Offshore Wind Farm for RWE Renewables and a new generation WTIV for Maersk. Under Process Solutions, we are working on the Shell Whale newbuild FPU; Shapoorji Armada Sterling V FPSO conversion; another FPSO, Tupi P-71 is undergoing modification and integration at our yard, as well as NOC Gallaf Batch 2 project.
For Gas Solutions, we have started work on Bechtel Pluto Train 2 project and are close to completing the construction of MOL LNG Bunker Vessel. We are expect to commence work during the year on a recent EPCI gas topside win from a major energy company in Australia. We have the last unit of Ropax to complete for Norled and have started work on the NApAnt Scientific Research Support Vessel for the Brazilian Navy under our Ocean Living Solutions.
We are at an advanced stage of completing the second Transocean deepwater drillship, Deepwater Titan. For the strategic technological collaborations, I would like to mention the group has entered into a number of strategic collaborations with government agencies, research institutions, classification society and industry partners to develop novel and non-traditional technological solutions.
Some interesting projects include: the design, fabrication, and integration of a hydrogen fuel cell system on to a Ropax vessel; development of a first-of-its-kind ammonia bunkering vessel; development of sustainable ocean data centers; joint research project with TCOMS to further develop, validate, test, and enhance the group’s SWACH Floating Wind Solution; development of the group’s proprietary SI-VAM Wind Solution. These collaborative efforts are important and will further strengthen the group’s core engineering capabilities, as well as support our sustainability objectives and the industry’s zero carbon ambitions.
Now, allow me to touch on the proposed combination. Towards the end of April this year, we announced the proposed combination of Sembcorp Marine and Keppel O&M, KOM. This is a significant milestone for Sembcorp Marine and a culmination of our strategic business transformation journey that started in 2015.
Since the announcement, we have received feedback from our shareholders and we are very appreciative of these open lines of communication. In our interactions with our institutional and retail shareholders, many have welcomed and expressed support for the proposed combination. Thank you.
There continue to be investors’ discussions around the enterprise value ratio and equity value exchange ratio. I would like to take a moment to address this. As you know, the proposed combination is based on a 50-50 enterprise value ratio between Sembcorp Marine and KOM. After taking into account of the respective capital structures of the two companies, a S$500 million cash payment that KOM will make to Keppel Corporation and other adjustments, we arrived at an agreed equity value exchange ratio of 44% to Sembcorp Marine and 56% to Keppel Corporation.
It should be noted that while the exchange ratio factors in the payment and adjustment I just mentioned, the acquisition by the combined entity is a restructured KOM, which excludes KOM’s legacy rigs and associated receivables and certain out-of-scope assets. With this arrangement, future risk in connection to the legacy rigs and associated receivables, such as their recovery amount, will not affect the proposed combination.
Also, an equivalent amount of intercompany payables will be removed from the balance sheet of the restructured KOM to offset the legacy assets excluded. The restructured KOM will hence come with minimal debt, which will preserve the debt headroom of the combined entity to facilitate future expansion. Taking the above into consideration and the compelling rationale for the proposed combination, we believe the proposed combination is beneficial to Sembcorp Marine and our shareholders.
In closing, allow me to reiterate. As you know, our industry is evolving extremely rapidly. We have taken concrete steps in the past years to position Sembcorp Marine at the center of the global energy transition to a low-carbon economy. The industry outlook for the oil and gas, renewables and other green solutions continues to improve. There are exciting opportunities ahead.
We have secured S$1.9 billion worth of new orders in first half 2022. With improving orders visibility, we are working on multiple tenders opportunities and actively converting orders pipeline into firm contracts. We anticipate operational and financial performance to continue to improve in tandem.
Let me pass the discussion to William Goh, our Group Finance Director, who will share more details on our first half 2022 financial performance. Thank you. William, please.
William Goh
Mr. Wong, thank you. Once again a very good morning to everyone taking time to join us in our results webcast. Let me very quickly go through the key financial highlights. At the top line revenue for first half 2022, we generated S$1.1 billion, which is 30% higher on a year-on-year comparison.
At the bottom line, we generated a net loss of S$143 million, which is an improvement of 78% from the corresponding period last year. At EBITDA level, there was an improvement of 97% to minus S$19 million. New orders for the period was S$1.9 billion, and that brings our net order book at the end of first half 2022 to slightly above S$2.5 billion.
The key metrics in terms of financial performance, as I mentioned earlier, top line improved by about 30%, and this is underpinned by the positive outcomes for project completion terms with some of our key customers, as well as the initial contributions for our new projects. There were residual pandemic-related challenges. With the measures in place, these were largely resolved, and with financial prudence, they all contributed to the improved overall performance.
The net loss of S$143 million was an improvement of 78%. They were largely attributed to the low, slightly below breakeven activity volume, as well as some residual COVID-19 challenges, which resulted in some one-off cost provisions and overheads. As mentioned earlier, at the EBITDA level, it is S$19 million, that is close to breakeven.
Moving on to the cash flow and liquidity. As you can see, we generated positive operating cash flow of S$307 million for first half 2022. And this is largely attributed to the increase in project completion and receipts, offset with our working capital needs.
In terms of investing activities, we have guided that we have suspended all new CapEx, and for the maintenance CapEx, we continue with our optimization program, and this has contributed to the very low S$10 million of investing activities, which is a 55% reduction from the prior period. There is minimum movements in financial activities, and so the overall net increase in cash for the period is a positive S$312 million, bringing the cash balance at the end of first half of 2022 at S$1.4 billion.
In terms of the overall capital structure, as well as gearing. As you can see, our net debt has improved to S$1.7 billion, and this has resulted in a lower and improved gearing ratio of 0.44 times. And with the improved liquidity situation, the residual rights issue proceeds from our last year’s S$1.5 billion rights issue, as you may recall, we used S$780 million in last year, bringing forward a balance of S$720 million. Given the liquidity position improvement, there were no usage of this S$720 million rights issue proceeds.
Let me move on a bit to unpack the breakdown on our revenue. Focusing on the table on the right, as you can see, floaters is our largest segment contributing 55% or S$603 million. Repairs and upgrades is our second largest segment of S$204 million, followed by offshore platforms, and rigs, which also include our WTIV activities.
Let me very quickly go through for each of the segment on the next slide. So floaters, the revenue rose [indiscernible] to S$603 million. The key projects included in this segment include the floating production storage and offloading, as well as floating production units, both newbuild as well as conversion.
The key projects that contributed to revenue for the half include both delivered, as well as ongoing projects. For the delivered projects, we delivered the Equinor for the Johan Castberg field, and we also delivered the Technip Energies, the Karish newbuild FPSO. For ongoing projects, we have our Shell Whale FPU newbuild, we have a P-71 newbuild FPSO, and also the Shapoorji FPSO conversion. These projects contributed to the improved revenue for the period.
Moving to the next segment for repairs and upgrades. The revenue declined by about 14% year-on-year due to the residual COVID-19 impact. As you may recall, in the first quarter of this year, there were still COVID measures in place at the business level and some of this impact in terms of the movement of vessels flowing in and out of Singapore for repairs and upgrade purposes.
Nevertheless, the overall activities compared to previous period, in terms of vessel served, there was an increase to 96 compared to 84 in the corresponding period last year. Within the various repairs and upgrade activities, the largest segment continues to be LNG carriers and there were a total of 10 LNG carriers that were serviced during the period.
There were also a couple of key FSRU and LNG reliquefication upgrades and retrofits, which incorporate also green solutions like our ballast water management systems. The rest of the segments continues to be applicable in terms of various vessel types serviced at our yards.
Let me move on to the third segment, into the offshore platforms. And this segment includes renewable solutions as well. For this segment, the revenue declined 52% year-on-year, largely because more projects neared completion and therefore, lesser revenue contribution. The projects in this segment includes fixed production platforms for oil and gas activities production, as well as offshore wind farm platforms servicing the renewable sector, as well as gas topsides.
The projects that contributed to revenue for the period include, for delivered projects, the Orsted Hornsea 2 Offshore Wind Farm, which has a Reactive Compensation Station Topsides, the Jan De Nul Formosa 2 Offshore Wind Farm, as well as the TotalEnergies Tyra Redevelopment Project for oil and gas production. For projects under execution, we had the RWE Renewables Sofia Offshore Wind Farm, the gas topsides for a major energy company in Australia, the Bechtel Pluto Train Project, as well as NOC Gallaf Batch 2 wellhead platforms.
Moving on to the rig building segment, revenue rose 87% year-on-year as we worked towards completing our two advanced drillships at Transocean, as well as initial contribution for our Maersk WTIV. So delivered projects was the Transocean Deepwater Atlas, as our CEO mentioned earlier. And the projects under execution includes the second Transocean Deepwater Titan, which is at finishing stages, and as well as the Maersk WTIV.
For specialized shipbuilding, there was a decline in terms of overall revenue. The projects include our Ropax ferries as well as the LNG bunker vessel and our new navy research vessel for the Brazilian Navy. We delivered two of the three Norled Ropax ferries during the period and therefore, the third and last unit continues to be under execution, and likewise, the 12,000 cubic meters LNG bunker is also at its advanced stages of completion. The Emgepron NApAnt Research Support Vessels for the Brazilian Navy are in its initial stages of execution.
Zooming back up to the overall project delivery schedule, as we have guided, we have a total of 19 projects under execution with 12 projects scheduled to be completed in FY2022. To date, we have delivered seven of these 12 projects and therefore, a further five to be delivered in the remaining months. Over the next couple of years, we have a further seven projects for delivery and these will be the projects that will contribute to our future revenue.
And that’s it for the financial overview. Thank you very much.
Question-and-Answer Session
A – Mun Yuen
Thank you, Mr. Wong. Thank you, William. We are now open for question-and-answer. You may use the webcast platform to put your question to management. Please do identify yourself and the organization that you represent.
Well, we are in receipt of the first question. This comes from Lim Siew Khee, CGS-CIMB. Thank you, Siew Khee.
Can you please elaborate on your significant improvement in operating cash flow? And do you expect this to swing into negative zone, given the stronger order book you have now?
Second question. Outlook for order pipelines in the second half. Thank you, Siew Khee, for the questions.
William Goh
Siew Khee, thank you for firing off with a set of interesting questions. Yes, indeed, our operating cash flow improved significantly. As I mentioned earlier, that was largely due to the ongoing completion of our projects. So with the completion of projects, the collections of the residual payments, especially the completion payments, those contributed to our projects.
In terms of how the operating cash flow might look in the foreseeable quarters, this will be an interplay, as you know, between the further completion of our existing projects on the one hand, as well as the working capital needs for our new projects, as well as perhaps further projects in the horizon.
So we remain hopeful that as we focus more on the progress payments kinds of projects, our working capital overall needs will continue to be very manageable, but overall it will depends on the interplay between these two, but we want to make sure that in terms of the way we manage our working capital, overheads is managed, focus on the progress payment projects, and we believe this will serve us well. Thank you.
Mun Yuen
Thank you. Thank you, William. Our next sets of question comes from [indiscernible] of Austal. Right. He has this question for management. How is SCM planning ahead on increasing manpower for the bulk of FPSO projects and FLNG projects due to start in 2023? Will there be active level of recruitment from usual overseas countries? And what is the current manpower level in SCM Singapore yards?
Wong Weng Sun
Thank you, Robin. For the current manpower for Sembcorp Marine, it has not been returned to the pre-COVID-19. That is because of several factors. First, the job completion is – for the past projects is near to achieve its delivery. And secondly, we also started to secure new contracts and such contracts will take a few months to perform the engineering as well as procurement of materials before we start any work.
So therefore, there will be sufficient time for management to plan the recruitment of this, what level to achieve what we have planned when we signed the contract with the customer. And yes, there is always the ongoing recruitment exercise from the usual overseas countries. And this is also to replenish the workers and also at the same time, to reveal the type of skillset we need as the project progresses along. Thank you, Robin.
Mun Yuen
Thank you. Thank you, Mr. Wong. Well, Siew Khee is back with some more questions. Are you still on track to deliver Titan in 2022? And do you expect cash receipt of US$350 million in 2022? What is the percentage of completion of P-71 Shell Whale and Shapoorji projects?
William Goh
Siew Khee, thank you for the question. Let me address that and also go back to earlier question on orders. So we are on track to deliver the Transocean Titan, Deepwater Titan in 2022. And yes, we have announced the payment terms for this particular project and we will collect the US$350 million that you referred to within 2022.
In terms of the percentage of completion for the projects you mentioned, you probably know that we don’t give specific guidance on such data as they may be commercially sensitive, but what we will say is that, these projects continues to be progressing well within the schedule mutually agreed between the customers and ourselves. And those schedules, you probably saw earlier in the slide.
Let me also say that the percentage completion whereby you wish to compare with 2H 2022, we do not expect any significant delays or unexpected situation to prevent us from a smooth execution of these projects. So just to refer, earlier on the COVID challenges, as you know, we have the Ukraine war as well. They also contributed some supply chain effects. And so some of these including some labor movement mobility, they may have residual effects. But naturally, as we have guided, we have measures in place and we believe that these should be largely manageable.
I will move to your earlier question regarding the outlook in terms of orders. So we have guided that in terms of orders visibility, they continue to improve and this is also demonstrated by the S$1.9 billion of new orders that we have secured in the first half of this year. The S$1.9 billion is already close to double the whole of FY2021. So we are thankful that we are able to build more traction in these new orders.
Going forward, we have also mentioned that there were some projects and these are also in the public domain, that we are also involved in some of the FPSO tenders for Petrobras in Brazil, and also we are actively working on the front-end engineering design work for the Dorado FPSO project in Australia. So these are projects which we continue to work to convert into orders.
You might recall that there is also a project that was in advanced stages of conversion earlier this year, but they were actually deferred and there is a Cambo FPSO project. While it was deferred, the new owner of the project is actively working on bringing the project into fruition. So we are also working on this project as well.
So those are some of the broader points that I can share in terms of guidance on orders visibility. As Mr. Wong mentioned, we also actively involved in responding to several other tenders on all sides of energy transition, the oil and gas side, largely in production, as well as on the renewables and the greener solutions. I hope that helps, Siew Khee. Thank you.
Mun Yuen
All right. We have Adrian Loh from UOB Kay Hian, asking management this question. Could you please give us a bit of color on repairs and upgrades with regards to the cruise ships particularly and average revenue per vessel for this segment?
William Goh
Thanks for the question, Adrian. Yes. Maybe just a step back to give perspective on the overall repairs and upgrades market, as you know, this particular market, given the overall improvement in economic activities and recovery from COVID, overall business volume is increasing for the entire industry.
For us, we see improvement sequentially quarter-on-quarter except that for beginning of this year, there were some – whereby because of COVID-19 measures, some of our orders or customers could not come to our yard. So that affected a little bit our first half performance for the repairs and upgrades segment. What we see from the industry development standpoint is that, the overall sector will continue to improve and we are also optimistic that this segment for us will continue to improve.
As you know, in terms of the current energy landscape, the oil and gas sector, given the energy security and the Ukraine-Russia situation, gas continues to be a very significant and essential for this energy transition. So the associated work, our repairs and upgrades for LNG carriers continues to be very active. And also in terms of the relaxation of COVID-19 measures, you have more cruises moving – going back into operations. And so, therefore, in terms of cruise activities, we also see positive traction for this segment. But overall, what we say is that, all the various subsegments within repairs and upgrades, they all look generally positive. Thank you.
Mun Yuen
Thank you. Thank you, William, there with so much elaboration. All right. We have Rahul Bhatia of HSBC. He has three questions. I think some of these questions could have been addressed somewhat, but here they are. I have three short questions he says. In Slide 13, you mentioned breakeven activity volume. How much is it based on your estimates?
Two, could you comment on expectation for the profit trend second half 2022 versus first half 2022? And for the company to – and when for the company to turn positive? Related to the merger, could you share on what regulatory approvals you have already received and what remain before EGM can be convened?
William Goh
Rahul, thank you once again for your usual interesting questions also from past results briefing. Let me try to address your questions in sequence. So you mentioned about the breakeven activity volume and how much it is based on our estimates. I think when we look at our business activities and the overall industry landscape, as well as overall margins, we have a view in terms of what kind of activity volume will enable us to breakeven and thereafter the path to profitability.
Naturally, these are forecasts of our future activities of our existing projects which we have better grasp of, as well as forecasts in terms of new orders that will come our way. But in essence, as we have guided, presently what happened is that, for the half of 2022 – first half of 2022, you have, on the one hand, the projects nearing completion. So therefore, as you know, based on the S-curve, towards completion, the revenue contribution is lower.
Yes. And on the other hand, the new projects that kicks in, the initial periods where it’s basically engineering, the overall contribution revenue is also lower. So that contributed to the overall volume for this half, which is therefore overall below our breakeven volume. We would then like to see that our newly secured projects begin to contribute more significantly in the next quarters, and also hopefully, with more orders coming through. The overall activity volume will then increase to reach breakeven level and obviously, our forecast is to bring well beyond the breakeven level in the foreseeable periods. So that is really how we look at the situation in the activity volume.
In terms of the expectation for the profit trend for second half 2022 versus the first half, as we have guided in our press release and Mr. Wong mentioned earlier, we anticipate that the second half 2022’s overall performance will continue to improve vis-à-vis our first half. We probably are not in a position to be too specific in terms of guidance of whether second half 2022, in terms of its P&L specific, but overall it should be improving based on our current anticipation and assessment.
In terms of the merger, on the regulatory approvals that we have already received and what remains before the EGM, well, there were various countries whereby the regulatory approvals were relevant, and that includes countries like Brazil, like Norway, for example. What we will say is that, because all the advisors actively working on them for some time now and overall the progress has been good and some of these approvals have already been obtained.
And what remains before the EGM, Singapore, for example, continues to be in progress and you probably read in the media that CCCS is also looking at evaluating our application and this will continue, but we remain hopeful that all relevant approvals will be obtained before the EGM. I hope that helps, Rahul. Thanks.
Mun Yuen
Thank you. Thank you, William again. We do have a question from Richard Toh of Kenrich. I think it probably is addressed by William’s answer just now. His question is, given that you’ve done so well in 2022, can we assume that the whole year of 2023 is similar? Can we assume that second half 2022 and 2023, Semb Marine will report positive net earnings?
I believe that William has just addressed that. So we thank you for your question, Richard.
All right. Let us move on. All right. Adrian is back with more question. Adrian of UOB Kay Hian. Are you able to provide more details of the gas topsides win in Australia, the name of the client, any local content requirement and any other details?
Wong Weng Sun
Thank you, Adrian. At the moment, we were not able to provide you more details about the client. However, I would like to share that the work is all to be done in Singapore, SCM group of companies.
Mun Yuen
Thank you, Mr. Wong. Sorry that we are not able to talk more about this project currently. Look out for updates in the future. All right. We have a question from Mr. Philip Loh of GEL [ph].
He raised this question to management. What is the estimated contract value of the seven partially completed Sete’s drillships in SCM books? Given the improvement in both day rates and utilization for high-spec drillships, what is the possible timeline to monetize these legacy assets?
William Goh
Philip, thank you for the questions. In terms of the Sete drillships in SCM books, I may have to take you back to 2015 where we look at the entire seven drillship projects and looking at the situation, we had conservatively made the necessary provisions, and that was about S$329 million.
And thereafter, in terms of the ongoing process to settle the series of projects, as you may be aware, we also announced that we have also settled this entire series of projects with the customer. So with those in place, in terms of the value of this drillship in SCM books, they are basically immaterial.
Secondly, in terms of the improvement in day rates and utilization rates for high-spec drillships, thanks, Philip, you obviously does – do a lot of homework. You are right to say that the high-spec drillships, in particular, the utilization rates have gone very significantly higher to well above US$300,000 per day, and especially in terms of the need for these drillships in the Gulf of Mexico, which is a very significantly active region.
So both day rates as well as utilization rates have increased, and also the duration of each of these fixtures, drilling fixtures, have also increased as well. And I would say that, not only for high-spec drillships, but even all general drillships as well as semis as well as for jackups as well as for shallow water drilling, overall the drilling industry has improved significantly.
So in terms of timeline to monetize the legacy assets, firstly, I just want to be clear that we do not have any legacy assets. All our previous jackups that were not taken delivery by the customers, we have already sold them to Borr Drilling. So we don’t have any legacy assets per se. You may – if you refer to the Sete residual two drillships, that one is basically one whereby we have settled with the customers I mentioned earlier. So if the opportunity arise to complete two of the most advanced drillships, where we’re in good. If not, it does not impact on our financials materially.
So taking a step back again, in terms of monetizing the legacy assets, none. However, as you may know, in terms of our Borr Drilling receivables, we do have these receivables in our books, and even as we receive the interest and a partial repayment of principal as we work with the customers, they repay us over the agreed terms.
There is no stopping us from looking at monetizing these receivables. So if you are referring to that, yes, it is a good question. It is something that management continue to evaluate, especially in light of the improving drilling industry. I hope that helps, Philip. Thank you.
Mun Yuen
Thank you. Thank you for the elaboration there, William. All right. We have the next sets of questions coming from Jame Osman of Citi.
Thanks for the presentation. Would you be able to give more color on some of the cost factors that evolved since the start of the year? In terms of raw material, labor, or other related expenses due to supply chain bottlenecks, component shortages, how did they impact margins during the period? And what are the expectation? And for how costs could be managed going into the second half and beyond?
Wong Weng Sun
Jame, let me address this. As we all know, due to the geopolitical tension and also post-COVID recovery, the supply chain has been affected globally. And later then, we also came to know there are raw materials, especially on the steel, as well as copper also being affected greatly. So in other words, as things unfold and develop, there will be also shortage of electronic components related items. So all these, in fact, will then create a pressure on the supply chain, the availability of raw materials, and also completed component going forward.
As we have explained, for Sembcorp Marine, in the past months, we are focusing on completing the existing order book. And lately, we had signed a few contracts. We had the opportunity to consider and include such impact in our discussion with our customer. Of course, going forward, things may change, things may develop further and more attention has to be taken in terms of the supply chain and also the cost element for each of these areas I mentioned just now.
Mun Yuen
Thank you. Thank you, Mr. Wong. We have a written question from Richard Toh of Kenrich Partners. Can you shed some light on how the balance sheet will look post-merger?
William Goh
Richard, thank you for the question. In terms of the merger, we have given the basic pro formas for the combined entity, and you can refer to our announcement for some of these details. But basically, in a typical merger, the balance sheet of the two combined entity will be consolidated into the combined entity and the usual process of combination accounting [indiscernible] So perhaps it will be constructive if you refer to that. And if you have any specific detailed question, which we are able to respond to, we are happy to do so thereafter. Thank you.
Mun Yuen
Thank you. Thank you, William. I do not have any question on the platform. We’ll just give a couple of seconds. It looks like all questions have been fully addressed by management. We just want to again say a big thank you to everyone for joining this morning session. We thank you for your time and we hope to be able to speak to some of you again after this session. Good day.
Wong Weng Sun
Thank you.
William Goh
Thank you.
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