SembCorp Engineers and Constructors’ SembCorp Simon-Carves has supplied six out of the last 11 LDPE plants in the world since 1997, including this LDPE plant in Nanjing, China (pictured).

Performance indicators (S$ million)

Operating and Financial Review : Engineering & Construction

Continued emphasis
on process engineering.

SembE&C’s turnover rose 33% to S$1.1 billion, doubling PATMI to S$0.8 million, while the orderbook stood at a healthy S$2.3 billion.

Operations review
In 2005, SembCorp Engineers and Constructors’ (SembE&C) turnover rose 33% to S$1.1 billion, doubling Profit After Tax and Minority Interest (PATMI) to S$0.8 million.

During the year, we secured S$874 million of new orders to take our orderbook to a healthy S$2.3 billion as of end December 2005. As a result of SembE&C’s intensified efforts to pursue more overseas contracts, a larger 66% of our orderbook was made up of overseas projects, compared to 59% in 2004.

Similarly, process engineering jobs made up two-thirds of the orderbook, reflecting SembE&C’s primary focus on process engineering, which has been a mainstay of the business since 2004.

In December 2005, subsidiary SembCorp Simon-Carves successfully secured a S$400 million contract to construct a 400,000 tonnes per annum Low Density Polyethylene (LDPE) plant for chemical producer Huntsman on Teesside, UK. This contract was a follow-up to the earlier contract awarded in January for the design of the same plant, expected to be the largest single-stream LDPE facility in the world.

Having supplied 75 LDPE stream facilities around the world, including six of the 11 most recently commissioned, SembCorp Simon-Carves is recognised as the world’s most experienced process engineering contractor for the design and supply of LDPE plants.

Another significant contract secured in 2005 was the S$198.6 million contract to build an additional facility adjacent to the oil refinery that we are currently building for Essar in India. The project is expected to complete in December 2006.

The global construction market is expected to be relatively positive as sustained oil prices, a recovering Japanese economy along with a dynamic US economy are expected to continue to spur infrastructure investments worldwide.

Notwithstanding the stable and positive global construction outlook, we continue to face margin pressure as more construction firms from China and India, advantaged by their lower cost base, compete to gain a foothold in the international arena.

Moving forward, we will press on with our strategy of focusing on overseas markets, especially those in China, India, Southeast Asia and the Middle East, where strong growth potential is evident. We will also continue to concentrate on process sectors, especially the petrochemical and oil and gas industries where high oil prices act as a driver for added investments. We will do so by capitalising on our extensive process engineering track record and our reputation as an international leader in process engineering design and construction.

To increase overall profitability, we will strive towards improving our project execution through stringent cost controls and the continuous strengthening of risk management processes.

Significant contracts in orderbook
Description Country Client Remaining contract value
(S$ million)
End date
LDPE Plant UK Huntsman Petrochemicals 400 Feb 2008
Circle Line Contract 856 Singapore LTA 335 Feb 2009
Oil Refinery India Essar/Vadinar 282 Dec 2006
Mediterranean Garden UAE Nakheel 216 Jun 2006

Total orderbook as at December 31, 2005: S$2.3 billion