Sembcorp Industries Ltd (U96) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon and welcome to Sembcorp Industries' Half Year 2020 Results Presentation Webcast. I'm Lay San from Group Corporate Relations and Sustainability. The members of the panel for today's presentation are Group President and CEO; Wong Kim Yin; and Group CFO, Graham Cockroft. Without further delay, I will now hand over to Kim Yin to begin the results presentation. Kim Yin, please.

Good afternoon, and thank you for logging on to Sembcorp's Industries first half 2020 results briefing. Since the beginning of the year, global economies have been severely affected by COVID-19. Measures to contain this unprecedented pandemic have disrupted travel and transportation, manpower access and supply chains. Economic activities, including demand for Sembcorp's products and services have turned down across the board. In particular, the offshore & marine sector is severely hit. The operating environment for Sembcorp in first half 2020 has been very challenging. Let me briefly outline the key performance figures. In first half 2020, the group delivered a turnover of SGD 3.5 billion, profit from operations of SGD 39 million, and underlying net profit of SGD 60 million. However, due to losses posted by the Marine business as well as exceptional items recognized during the period, the group recorded a net loss of SGD 131 million. Earnings per share for the period was negative SGD 0.083 and annualized return on equity was negative 5.2%. Here are the highlights for each of our businesses. The Energy business delivered a resilient underlying performance amidst a very challenging environment. Underlying net profit was SGD 156 million compared to SGD 184 million in the same period last year. However, due to exceptional items totaling a negative SGD 161 million, a small net loss of SGD 5 million was recorded for first half 2020. Graham will bring you through the details of these exceptional items in his section of his presentation. In the first half of 2020, despite the global pandemic, we continue to make progress in strengthening our renewables portfolio. In Singapore, we were awarded a contract by PUB, Public Utilities Board, to design, build and operate a 60-megawatt peak floating solar farm. When completed, it will be one of the largest single floating PV systems in the world. Sembcorp also launched a renewable energy certificate aggregator platform that manages RECs, renewable energy certificates, RECs, from multiple sources. Backed by our own growing renewables capacity, this digital platform offers liquidity and flexibility, and enables our customers to transact RE100 recognized RECs to meet their green energy requirements. In India, we are actively supporting the country's renewable energy ambitions. Over the past few years, Sembcorp has gained a solid reputation with our successful track record of developing and operating renewables assets. We recently commissioned the remaining 74 megawatts of the Solar Energy Corporation of India, otherwise known as SECI, S-E-C-I, SECI's third wind power project. With that, Sembcorp became the first developer to fully commission projects awarded in the SECI 1, SECI 2 and SECI 3 wind project tenders. Under Urban, the Urban business delivered a strong performance in first half 2020. The business more than doubled its net profit to SGD 38 million from SGD 18 million in the previous year. This was driven by strong land sales achieved at its Sino-Singapore Nanjing Eco Hi-tech Island project in China and Kendal Industrial Park project in Indonesia. Despite the challenges faced by the business due to the pandemic, land sales and order book remained healthy. Total land sales in first half 2020 was 85 hectares, slightly lower than first half 2019, and this is mainly due to lower land sales to Vietnam, offset by higher land sales in China and in Indonesia. In the meantime, net order book was 307 hectares. The Urban business has a significant land bank of integrated urban developments in Vietnam, China and Indonesia, and that will underpin its future performance. If we move on to Marine. The Marine business continue to face challenging market conditions. The business recorded a net loss of SGD 117 million to the group in first half 2020. This was mainly due to the shutdown of production activities at all of its Singapore yards since April as a result of the COVID-19 pandemic. As highlighted by Sembcorp Marine in its first half 2020 results announcement, the company's immediate priority is to address its urgent liquidity needs to fund its operations and write out the projected downturn in the offshore and marine industry. Having endured a prolonged offshore and marine downturn, the business was positioned to recover in 2020. However, it was unexpectedly hit by COVID-19 and the collapse of oil prices. Given the delays in executing existing projects and with new orders likely to remain depressed in 2020, Sembcorp Marine now foresees that recovery will be pushed out to 2021 and beyond. These developments had led to Sembcorp Marine's proposed rights issue as announced on June 8. As we face an unprecedented COVID-19 pandemic, our priority continues to be the health and safety of our people. We have implemented COVID-19 mitigation measures and business continuity plans. We supported our employees in remote working arrangements and rolled out campaigns to care for their physical and mental health. We believe that delivering reliable services is the best way to serve our communities. I'm pleased to report that our Energy business has continued to deliver essential energy and environmental solutions globally with no disruptions to date. We have also supported our communities in other ways. For example, in Singapore, we have committed SGD 1.5 million in support of our customers. Last but not least, we understand that this is also the time to build the resilience of our businesses for the future. As we confront COVID-19, we take the opportunity to sharpen our focus on enhancing key areas so that we can better protect value for our stakeholders in future. Let me now go through our outlook for 2020. The COVID-19 pandemic is severely impacting global economic activity, as we all know. The international monetary fund expects the pandemic to cause a global recession in 2020 and Singapore's economy is now in recession. Oil prices have also seen a sharp decline. The group expects to incur losses for the full year due to the expected continuing losses at Sembcorp Marine and the exceptional items recorded in this first half 2020. Now having said that, the group expects to maintain positive operating cash flow in 2020. Lockdowns due to COVID-19 and the consequential reduction in economic activity has led to a decrease in energy, demand and prices. In the second calendar quarter of 2020, Energy demand in Singapore, India, and the U.K. have all declined by approximately 5% to 20% compared to the same period last year. The underlying performance of the Energy business in 2020 is expected to be markedly lower than in 2019. Net profit for the Energy business for FY 2020 is also expected to be affected by the loss of contribution from divested assets and the absence of one-off income in Myanmar. In addition, exceptional items, including the negative SGD 161 million announced in the first half of 2020 as well as the expected currency translation loss upon the completion of the divestment of the Chilean water business will all have an adverse impact on financial year 2020 net profit. Profitability of the Urban business is expected to be lower in 2020 compared to 2019 due to lower contribution from its projects in China and Vietnam. Land and property sales for the urban business have been affected by the COVID-19 pandemic. Due to measures undertaken by various governments to contain the pandemic, the business is experiencing delays in regulatory and other approvals required for the Urban business's projects. The uncertain economic outlook has also led to lower take-up and demand as well as delayed launches for some of the businesses, integrated developments and properties. The Marine business is gradually resuming project executions. Now how soon the Marine businesses workforce could return to full strength will be instrumental to determine the business outlook in subsequent quarters. Sembcorp Marine will work to ensure adequate liquidity and financial strength to sustain its operations and right through the severe industry downturn and the COVID-19 pandemic. In this difficult business environment, Sembcorp Marine expects losses to continue in the foreseeable quarters. Now despite the significant challenges in the short to medium term, I believe there are opportunities we need to capture to better position for the future. We are very focused on delivering long-term value to our stakeholders and believe that the proposed recapitalization of Sembcorp Marine, followed by a demerger to create 2 focused companies, and this is a very important step for us. The demerger will transform Sembcorp Industries into a focused Energy and Urban business. Sembcorp Industries will be able to focus on our core areas of Energy and Urban development to better capture growth opportunities. The demerger also delivers a clearer investment proposition and makes Sembcorp Industries more comparable to our peers. This will result in a potential positive re-rating of Sembcorp Industries. We also expect to see improved returns and a stronger balance sheet from the deconsolidation of Sembcorp Marine. The removal of exposure to the offshore and marine industry is expected to contribute towards an improvement in the financial metrics of Sembcorp industries. There will also be a significant reduction in debt levels. On a pro forma basis, debt levels, which were SGD 11.6 billion as at the end of 2019, will decrease to SGD 8.7 billion. Lastly, the demerger will provide our shareholders with direct control over their interest in 2 focused businesses with the same direct and significant shareholder, Temasek. No payment is required from Sembcorp Industries shareholders to receive shares in a stronger recapitalize Sembcorp Marine. Sembcorp Industries shareholders will then have the flexibility of calibrating their portfolio according to their investment objectives. The transaction will require shareholders' approval via an extraordinary general meeting. A simple majority of over 50% will be required for this resolution to be passed. In this resolution, Temasek will be required to abstain. Sembcorp Marine shareholders will also be required to approve the Sembcorp Marine right issue. The rights issue is also conditional upon Sembcorp Marine shareholders approving a resolution to waive their rights to receive a mandatory takeover offer from Temasek. I should highlight that the proposed demerger and Sembcorp Marine's rights issue can only proceed if Sembcorp Industries and Sembcorp Marine shareholders approve all interconditional resolutions at their respective companies' EGMs. The recapitalization of, and demerger with Sembcorp Marine, is a very important strategic step. We hope shareholders could give their full support by voting for the transactions at the EGMs. Having just come on board on the 1st of July, I'm very much looking forward to working with the team here at Sembcorp and our stakeholders at this important strategic juncture of Sembcorp's development. Now let me hand over to our group CFO, Graham, to take you through the group financial review. Thank you.

Thank you, Kim Yin, and good afternoon, and thank you for joining our results briefing. It's my pleasure to take you through the group's financial performance for the first half of 2020. Before we jump into the figures, I would just like to reinforce the point made by Kim Yin on the significant impact that COVID-19 has had and continues to have on a number of our businesses. You can see the impacts on these results, particularly in the following 3 areas. First, the drop in demand for energy and the fallen energy prices, which has directly impacted the performance of a number of our Energy businesses. Second, the restriction on production activities at Marine's yards and at our specialized construction business in Singapore due to the circuit breaker and other lockdown measures. And third, the impact of the pandemic on the global economic outlook and future energy prices, which has ultimately led to the impairment of a number of our investments and assets. So now to the numbers, starting on Slide 12. Sembcorp Industries posted a turnover of SGD 3.5 billion for the first half of 2020, 27% lower than the corresponding period of last year. The lower turnover across all business segments was mainly due to the direct and indirect impact of COVID-19. The group earned an EBITDA of SGD 452 million in the first half of 2020, 36% lower than the previous year of SGD 705 million. The lower EBITDA and underlying PFO arose mainly from the Marine and energy businesses. Excluding exceptional items, underlying PFO of SGD 246 million was SGD 216 million or 47% lower than the first half of 2019. Our share of results from associates and joint ventures of SGD 119 million was 20% higher than the SGD 99 million of the first half of '19. The better results came mainly from Urban's residential land sale in Nanjing. Net finance costs of SGD 244 million were 10% higher compared to the corresponding period in 2019. The higher finance cost was attributable to lower finance income from marine customers on deferred payment arrangements. And the group recorded a tax credit of SGD 4 million in the first half of 2020. So the net loss for the first half was SGD 131 million compared to a net profit of SGD 191 million for the first half of 2019. The total of exceptional items recorded for the half was negative SGD 191 million, and I'll go through the details of these items in a later slide. And before exceptional items, the group's underlying performance was a net profit of SGD 60 million compared to SGD 198 million in the same period last year. Earnings per share was SGD 0.083 per share negative, and EPS before exceptional items was SGD 0.024 per share. Turning to Slide 13, looking at group turnover. The Energy business recorded a turnover of SGD 2.5 billion, SGD 612 million or 19% lower than the first half of 2019. The lower turnover was mainly due to the impact of COVID-19 and the decrease in energy demand and prices arising from the reduction in economic activity. The decline was also partially due to the absence of contribution from divested assets. This adverse impact was partially mitigated by plants with long-term contracts where revenue is based on plant availability. Marine's lower turnover was the result of lower revenue recognition from rigs and floaters and offshore platform projects, partially mitigated by higher revenue recognition from offshore platforms, specialized shipbuilding, and repair and upgrade projects. The decrease in other businesses turnover came mainly from the construction business due to COVID-19 lockdown in Singapore and the absence of turnover from the commercial construction business of Sembcorp Design and Construction after its divestment in October 2019. On Slide 14, we're looking at group profit from operations. So for our PFO before exceptional items, the group recorded -- reported a profit of SGD 246 million, 47% lower than the corresponding period last year. For Energy, the first half PFO before exceptional items of SGD 410 million was 9% lower than the first half of 2019. The lower performance was mainly due to the Singapore and India businesses, and I'll go through those in more details in subsequent slides. Marine's loss from operations in the first half of 2020 was SGD 171 million. The first half of 2020 results continue to be impacted by the low overall business volume, offset by profits from repairs and upgrades. For Urban, the first half PFO of SGD 38 million doubled from the SGD 19 million in the first half of 2019. The increase is mainly due to the recognition of residential land sales in the Sino-Singapore Nanjing Eco High-tech Island in China; and Kendal Industrial Park in Indonesia. The decrease in PFO for other businesses came mainly from our specialized construction business, which stopped work due to the Singapore circuit breaker measures, leading to no revenue recognition during this period and due to delays in the progress of projects. In addition, the commercial construction business of Sembcorp Design and Construction was divested in October of 2019. The group's higher corporate costs were mainly due to an increase in personnel costs as we continue to build our capabilities in key areas such as digital and technology. After pretax exceptional items of SGD 207 million, the group's profit from operations was SGD 39 million, a decrease of 91% compared to the first half of 2019. Turning to Slide 15 and group net profit. The group's net profit before exceptional items was SGD 60 million compared to SGD 198 million in the first half of 2019. The most significant drop came from businesses that were impacted by COVID-19, namely the Marine business and the Specialized Construction business and the other business. The Energy business' underlying net profit decreased 15% to SGD 156 million compared to the prior year's profit of SGD 184 million. We have more details in the next few slides on Energy's performance. Our share of Marine's net loss was SGD 117 million for the half, an increase over the first half net loss of SGD 6 million. For Urban, the net profit in the first half was SGD 38 million, 111% better than last year for the reasons explained in the previous slides. As I mentioned, the decline in other businesses came mainly from the Specialized Construction business. Post-tax exceptional items totaled SGD 191 million. As such, the group reported a net loss of SGD 131 million for the first half of 2020 compared to a net profit of SGD 191 million in the first half of 2019. So Slide 16 gives a lot more detail on the exceptional items that we're reporting this half. The unprecedented impact of COVID-19 on the global economic outlook and low energy prices have impacted the assessment of the recoverable amount of certain investments and assets. Exceptional items in the first half of 2020, including impairments of these investments and assets amounted to negative SGD 191 million. Under Energy, we made a total impairment of SGD 161 million, comprising the following: a SGD 38 million write-down of gas oil reserves in Singapore, a SGD 44 million write-off of gas oil inventory stored at Hin Leong Trading, an SGD 81 million impairment on the investment in Sembcorp Cellular Power & Water Company, and a SGD 4 million impairment for the Chile water business due to an increase in the net asset value of the asset held for sale, pending completion of the divestment. These were offset by a SGD 6 million preliminary negative goodwill recognized upon the completion of the acquisition of Veolia ES Singapore and the public cleaning business of Veolia ES Singapore Industrial. Under other businesses, there was an impairment taken for our investment in Shenzhen Chiwan Sembawang Engineering Company in China as the recoverable amount of the investment is expected to be lower than its carrying value due to considerable uncertainty on the marine industry outlook. Turning to Slide 17, we're looking at Energy PFO here by geography. So due to the exceptional items, Energy's PFO of SGD 233 million was 48% lower than the first half of '19. Excluding exceptional items, PFO for Energy remained resilient, achieving SGD 410 million in the half, only a 9% decline against the first half of 2019. Slide 18 has a waterfall chart by geography of the Energy PFO. So this chart reconciles Energy's PFO in the first half of 2019 to the PFO for the first half of 2020, both before and after exceptional items and shows the variances for each geography. The pink bars show the headline PFO figures, while the orange bars show the underlying results. You can see that underlying growth came from most of our markets, except Singapore and India. The slowdown in economies and power demand impacted Singapore and India operations, as seen in the chart. In addition, Singapore's profitability was also lower due to the absence of contribution from divested assets. In India, Thermal Power Project 1 and Project 2, contributed first half 2020 PFO of SGD 97 million and SGD 14 million, respectively. The P1 improvement was driven by higher plant availability as performance in the first half of '19 was negatively affected by the shutdown of Unit 1 between January 1 and February 24, 2019. Performance of P2 in the first half of 2020 was impacted by lower demand and lower prices. PFO attributable to the renewables operations was SGD 75 million, an improvement over 2019 due to higher installed capacities, but partially offset by lower wind resource during the half. PFO for the renewables operations in the first half of '19 also included a reversal of accrued maintenance fees no longer payable. That was SGD 7 million. And for the first half of '20, the PLF -- the PLFs for P1, P2 and renewables were 86% for P1, 67% for P2, and 24% for the renewables business. The rest of Southeast Asia was lower compared to the first half of '19 mainly because there were liquidated damages income of SGD 6 million recognized from Myingyan in the first half of -- first quarter of '19. We saw growth in PFO from the following regions. Under rest of the world, our new plant in Bangladesh is now operating in combined cycle mode. There were also a bit of tariffs, lower interest costs and insurance settlements -- insurance settlement received for Salalah. In the U.K., improvement came with recognition of the capacity market payments, which had been suspended in the first half of 2019 and resumed in quarter 4 of 2019. Turning to Energy net profit on Slide 19. This chart reconciles the Energy segment's net profit in the first half of '19 to the first half of 2020, both before and after exceptional items. At the headline level, the net profit fell from SGD 177 million in the first half of '19 to a net loss of SGD 5 million in the first half of 2020. But if we exclude exceptional items, the underlying net profit decreased from SGD 184 million to SGD 156 million. And this reduction was mainly due to the decreased EBITDA -- sorry, EBIT of SGD 45 million, due to lower performance from Singapore and India, as highlighted in the prior slide. And the net finance costs, tax and net noncontrolling interests improved as the profit attributable to noncontrolling interests was lower mainly because Sembcorp Energy India Limited and Sembcorp Gas became 100% owned by the group in the fourth quarter of 2019. Turning to Slide 20, our group CapEx and equity investment. The group exercised discipline and capital expenditure during this difficult time. Energy CapEx was focused on strategic growth in the renewable segment, while the Marine CapEx was for the completion of new capabilities, and all nonessential CapEx had been deferred. Slide 21, the group's cash flow. Group cash flow from operating activities was SGD 206 million in the first half of 2020 compared to SGD 882 million in the first half, 2019. Increase in cash tied up and working capital came mainly from India. The group net cash flow used in investing activities of SGD 54 million. And if we exclude expansionary CapEx, the group's cash flow for the first half of 2020 was SGD 267 million. Looking at group borrowings on Slide 22. The group's net debt was SGD 10 million at the end of June 2020. Interest cover was 1.5x, while gross debt and net debt-to-capitalization ratios were 0.65 and 0.53, respectively. Total gross debt of SGD 12.1 billion at the end of the first half 2020 was higher than at the same time the year before. And you can see the profile of debt has changed with an increase in corporate debt from SGD 4.3 billion to SGD 5.2 billion, as we have redeemed our perpetual securities and replaced them with lower cost borrowings. Sembcorp Marine's debt also increased from SGD 2.9 billion to SGD 3.8 billion as it drew down our new and existing facilities to strengthen liquidity during this uncertain period. Slide 23 is the group debt profile. As at the end of June 2020, out of the SGD 12.1 billion, 26% of our debt is due within 1 year, 22% between 1 to 3 years and 17% is due after 5 years. Slide 24 on group liquidity. This is a new slide that we've added since last year to provide additional information on the group's overall liquidity. You can see at the end of June 2020, the group's cash and cash equivalents were SGD 2.15 billion, and our unutilized committed facilities were SGD 1.5 billion. So in total, at the end of June 2020, the group had SGD 3.7 billion of cash, cash equivalents and undrawn committed facilities. With this, I end my presentation, and we can take questions -- any questions that you may have. Thank you.

Thank you, Graham. We have now come to our Q&A session. Some housekeeping matters before we start. As you may be aware, on 8th June, together with our announcement of the proposed demerger, Sembcorp Marine announced a proposed rights issue. There are strict publicity guidelines governing the Sembcorp Marine rights issue. As such, management will not be able to add to the disclosures made nor comment further on Sembcorp Marine's disclosures. We thank you for your understanding in this matter. To participate in the Q&A session, please ensure you have dialed into the teleconference numbers provided in your invite. The operator will provide further instructions on how you can ask questions via the teleconference lines.

Thank you Lay San. [Operator Instructions] Our first question is Cheryl Lee from UBS.

Can you hear me?

We can, Cheryl.

I have a couple of questions. Firstly, if the demerger of Sembcorp Marine from Sembcorp Industries is approved, although the total debt consolidated by SEI decreases, with your smaller equity base, the leverage level -- the leverage ratio remains quite high. So could management share some thoughts about your comfort with gearing at these level? I'll stop here and then I have some follow-up questions.

Graham, you want to take that?

Yes, sure. Cheryl, the -- you're correct that the debt level, clearly, with deconsolidation of Marine, leads to lower total debt. But we also -- we'll see the equity base reduced by the amount of the distribution. So from a sort of a debt-to-equity metric, it doesn't look so great. But if you look at debt service, which is the way I -- sort of I think about it, the ability of the cash flow generated by the company to service debt, so more of a debt-to-EBITDA ratio, then you see there's quite a significant improvement that, in fact, were highlighted in the slides earlier. So that's really how we're thinking about it, that the ability to service the debt, in fact, is improved. So in terms of being worried, I'll be less worried post demerger than I am now.

And is there a sense of -- could you remind us as how much of debt headroom that still remains on a post demerged basis?

How much -- sorry, how much debt headroom remains?

Yes, that's right.

Yes. We don't have a particular cap or target in mind at this stage. So the willingness of banks to lend us money is really the only cap.

Okay. And then my follow-up question is with regard to Singapore on the utility side. And could you help us understand now following the sale of the large business last year, what underpins your profits of the SGD 30 million for the first half? And how sustainable are they?

I didn't catch all of that. Sorry, Cheryl, can you repeat that again? I'm not sure what you're talking about.

For Singapore, for Singapore utilities, you made a profit of a net profit of SGD 30 million for the first half of the year. What is driving this? Is this -- maybe just some color around where this -- what kind of businesses these are? Would it be like waste water treatment? Is it energy, electricity, gas sales, for example?

Yes. No, you're right. There are multiple businesses there that are clearly driving the profit. Some are more exposed to market conditions. For instance, the electricity generation is more exposed, whereas others are more capacity related and providing -- we're able to deliver capacity, then we're being paid for that. The part of the lockdown clearly has impacted activities on Jurong Island, and that has had an impact on energy demand, both electricity and steam, but we do expect to see those recover in time and so the volumes will return. The question, I think, will be around price, particularly in the power market as to where we go from here on price.

Next question is Lim Siew Khee, CIMB.

Can you hear me?

Yes…

Yes, we can hear you. Although a bit soft.

Okay, hang on. Give me a minute. Better?

Yes.

Yes, okay. Can I just follow-up on the Singapore operations. Is there any one-off other than the lack of actions of contract from a GIC?

No, I don't think there are any one-offs in this half, if that's the question, just for the Singapore market.

Okay. So then can we just go through by country. Why is China stronger given that, I mean, I'm talking about stronger compared to second half last year, given that you have sort of said that the demand for China would also be impacted by COVID and et cetera? So your profit for China is quite strong. Can you just help us understand this?

Yes. So I think, and compared to last year, there was much higher hydro generation, and that pushed back on the thermal production. And we're not -- we haven't seen that to the same extent this year. So that the thermal effectively is a balancing fuel for a lot of the hydro and the -- I think there's hydro in the neighboring province. And if they have excess supply, then it spills over the provincial border and has an impact on coal-fired generation at our plant.

Sorry, I don't get it. So the strength that you saw in the Chinese profit, this is because of less hydro generation that caused the demand in power? I mean…

Yes. What I'm saying is that it's a year-on-year comparison. And in 2019, the performance was impacted by higher levels of hydro generation than we're seeing this year. And that hydro generation has an impact on thermal production.

And Siew Khee, if you're looking at first half versus second half, I think second quarter is a high wind season, whereas the second half is a low wind season. So that also explains part of the difference.

Okay. But then other than that, do you see any -- so if you are going into second half this year, are you seeing any impact from COVID that result in -- that's what you have previously guided in your first Q update. Generally, the demand in China has actually come down. So can you, like what was your -- what's your outlook in second half for China?

Yes, we haven't given any specific outlook for China for…

Or whether do you see demand coming down or…

So I think it's -- if you look at China, and the way the pandemic impact has been managed, I think we're seeing, in general, at a macroeconomic level, we're seeing China come out a lot faster than a lot of other countries. So I wouldn't be surprised to see economic situation there improve more quickly than it does elsewhere.

No. If I may add also, having said that, if you think about it, there's always the second wave and a third wave that one can expect coming up from COVID. So we do not preclude the possibility of the areas in which our plants are serving in China being hit by a second or third wave, right? That could materially impact the outcome. But if you take a step back from the group's perspective, in terms of energy demand outlook, Singapore, India and U.K., all these 3 markets are big contributors, in fact, to our net profit. And we are seeing quite a bit of headwind in terms of demand reduction. Even just in the first half of the year, Singapore, we spoke about just now, energy demand dropped by 5%. India was 16% that we experienced and in the U.K., it was a good 20%. So the headwind in terms of lower demand and then prices, we do expect the second half of the year to be tough. China was exceptional, as Graham pointed out, because of the way they have managed COVID, and they were able to almost have a little bit of a bubble that they operate within themselves. But as I mentioned just now, we do not preclude the possibility of second and third wave. So it is very difficult to predict, and we didn't put out our outlook for China for this particular update.

Okay. Do you have the profit breakdown for India's plant? Is there a PFO?

Can you repeat that, sorry?

Yes. Yes, we do. The profit breakdown -- net profit breakdown for the plants in India. Shall I give it to you now? If you're talking about first half, for the Plant 1, is SGD 44 million. Plant 2, thermal Plant 2, is negative SGD 32 million. And then the renewable operations, it's SGD 13 million.

Okay. So for the first plant is SGD 44 million, right? Can you just confirm?

Yes, SGD 44 million

Okay. So that is -- is there any one-off in India?

Yes, there was. There was a SGD 23 million, which comprise some recognition of settlement with a customer on late payment and offset by some credit loss allowance. But if you remember, there were also some one-offs in second half, if you're comparing it against second half, yes.

Yes. So it's positive SGD 23 million in India, right?

Yes.

Okay. And sorry, I just go through all the accounting. Just the nitty gritty. So rest of the world, also quite strong, year-on-year and half-on-half. Can you walk us through, please?

So I think, I made reference to Bangladesh being up because we're now in combined cycle operation. This time last year, we were still in a simple cycle. What else is in the rest of the world?

Half -- actually compared to second half, is it also because of Bangladesh, because Bangladesh started to contribute in the 3Q, right?

Yes. Yes, that's right for Bangladesh. Yes. And also in…

The strength compared to second half last year?

Yes, it was stronger than second half last year.

Yes.

Because of?

I think if you remember, in the second half of last year, there was a $5 million settlement with EPC contractor. So if you adjust for that, then it was stronger. The Middle East also did better because there were higher tariffs in the Middle East and some insurance settlement for Cyclone in Oman.

Perhaps we can also give some the breakdown off-line, after the meeting, yes?

Yes.

Yes. Okay. So just going onto impairment amount that you have actually posted this quarter -- I mean, this half, can we just assume that you have actually again, looked through all your businesses and done what you could because it's quite significant, right? So going into second half, we have the Chilean business -- the Chilean recognition. And given that the new CEO has just come on board, are you looking to review your strategy or businesses? Or maybe just tell us what would be your top 3 focus for now?

There are a couple of facets to your question. Now in terms of strategy, our immediate focus, of course, as I mentioned in my delivery, just now, one of the most important things that right in front of us is this transaction, the demerger with Marine, right? If you look at our balance sheet and our business, Marine is a big part, and it has undergone this prolonged downturn and now hit by low oil prices and COVID-19. The demerger is a very important part of the strategic steps immediately moving forward. That will set us up such that we can focus on our Energy and Urban businesses. That will give us a stronger balance sheet and then resources available for us to pursue the growth in Energy and Urban that we want to. And so because of that, the immediate focus is on the transaction. And I would like to -- one cannot overemphasize the importance of it. And I would like to urge and encourage shareholders to support this important move. In the -- beyond the transaction in Energy and Urban, one of the most important trends that you can think about moving forward is in urbanization, electrification as well as in decarbonization. The direction that was set by the company prior to my arrival, in terms of delivering sustainable solutions moving forward, that resonates strongly with me. I think to the 3 trends that I mentioned just now, we are very well positioned. Sembcorp Industries is very well positioned to capture them. We are in the right industry in terms of providing sustainable solutions in Energy and in Urban. We are also in the right geographies. These trends are gaining momentum in Asia, especially. And we have very strong in India, we are very strong in Singapore, Southeast Asia. We also have a sizable position in China. So coming back, we are well positioned in terms of geography, we're well positioned in terms of our business sectors that we operate in, in terms of capturing this global trends. So near term focus on the transaction, rebalance ourselves. And then in the medium, long term, continue to deliver sustainable solutions, capturing the global trends moving forward. The other part of your question was in relation to whether or not in the second half, we see any other ones-off. I think we have to hold ourselves to the discipline of regularly reviewing our portfolio and our business and providing timely upticks to the market, right? So this round, we have got this significant write-downs or EIs that we have announced. What we can tell you is that I think, certainly, moving forward, we hope that we don't have to do this, but the economic situation, the external environment is actually very unstable. And what we can commit is that we will be upfront, and we will be timely, and we will do what we do regularly is to review our portfolio and make the transparent assessment and present it to you as soon as possible, if we -- if they are indeed. But today, to the best of our knowledge, we do not see any write-downs that are coming. Is that quite -- anything to add there?

Yes. No just -- clearly, today, we have done everything that we can that we think should be done. And what happens in the future depends on how the market plays out. But we have tried to our best to anticipate market conditions and reflect that in the adjustments that we've made.

Yes. Okay. That's very helpful. I just have 3 more questions. What would be your target ROE for Energy and Urban, of course, maybe from 2021 onwards?

We haven't disclosed any target ROEs for Energy or Urban, post demerger. I think, as Kim Yin said, the focus right now is to get this transaction completed. And then, I think, once that's done, then I think you'll see us starting to focus in on the activities of the 2 businesses.

Okay. And also just talk about the group corporate costs that actually went up compared to second half last year. I know that you said that year-on-year, you just spent more on digital capabilities. Can we take this half as a run rate going forward?

So we're about to start our budget process for next year. You have to ask me later in the year and I'll tell you. But right now, we are, as we said, we're investing in increasing capability, and it's these capabilities that will differentiate us in the future. So I know it looks like a cost right now, but these are really critical to the future. So don't begrudge them too much.

Okay. Also just on your guidance on dividends or whether your statement on dividend, that you will defer your dividend through end of the year. But then at the same time, you also guided for losses for the year. So how should we be looking at the dividend [indiscernible]?

So well, in the previous years, with the level of profits and the cash flows that we have, we have been paying out, what, SGD 0.04 per share in previous years. This year, clearly, with the EIs in the first half, you can already see, even if you achieve the same underlying performance, the EI will weigh us down quite significantly. The Board has met and considered seriously whether or not we should pay an interim dividend and we decided -- the Board has decided to defer the decision for year-end on the basis of wanting to be prudent. Now we have also said that our cash flow remains at the operating level strong, right? So we will have to evaluate at the end of the year, depending on the -- whether or not there are any other black swan events or headwinds that is unanticipated. And also whether or not, for instance, the transaction that we mentioned just now demerger with Sembcorp Marine, whether or not that happens. Those are all important factors that will weigh into the decision whether or not we would pay a dividend and how we would size the dividend. So without answering your question directly, I hope I have provided some guidance as to what are the considerations that will weigh in our minds when we consider the dividend in the year-end.

Our next question is from Foo Zhiwei of Macquarie.

Can you hear me?

Yes.

Yes. I have 3 questions, 2 on utilities and then the third one on Urban development. I'll just run them through all in one go. I think for question one, India, could you talk a bit about what was driving the better profitability at Plant 1? Now my question comes on the fact that I noticed that your second unit, your Unit 2 in Class 1, it has actually been down for June and July. So I'm a bit confused about whether that's annual maintenance or whether you're having a serious outage program? And then maybe you could just tell me when -- at your annual maintenance for P1 will be for 2020? So that's question one. Then, on question two, could you talk about how the decline in gas oil price is impacting the profitability of your gas sales? And then on three, for Urban development, what was driving the better profitability of land sales, was it more China? Or was it more Indonesia?

So let me start, Zhiwei, with the first part of your projects -- of your questions. On Project 1, it was more profitable in this half than in the first half of last year because we had a major outage, if you recall, at Unit 1 between January -- well, in fact, it started in November of '18, so for -- impacted '19 from January through until about, I think, the 25th of February. So the comparable period for P1, the half over the prior half, or the prior year, clearly looked better this half than it did in '19. Your question on the outage at Project 1.

Project 2.

Project 1 Unit.

No, Unit 2. Unit 2, P1, yes. I'm not -- to be honest, I'm not 100% sure if it's planned or unplanned. But can I come back to you on that?

Yes. I think that in terms of Unit 2, they are undergoing repairs and overhauls, and it's been down, and it's -- they're expected to take a few more weeks, so it is expected to come back online in August.

Okay. And then annual maintenance for P1 Unit 1?

We'll have to get back to you on that, Zhiwei. I don't have the annual maintenance schedule.

Okay. Can we move on to -- oh, sorry. And so there were -- I think there was no other operating line items within the P1 profit numbers because you did mention about SGD 23 million in total of one-offs for the entire business.

Those were in relation to the collections, right?

Yes. No. So the one-off was in relation to P1.

And in fact, receivable [indiscernible]

Yes.