Outlook Bleak for New Water Projects

Singapore-listed water treatment engineering company Hyflux posted a net profit of 41.2 million Singapore dollars ($29.4 million) for the year ended in December 2015, down 28% from the previous year when the company recorded extraordinary gains.

     Total revenue for the year increased 39% on the year to S$445.2 million, thanks to contribution from an ongoing construction of a water desalination facility in Oman. The Middle East and North Africa made up 39% of the total revenue, up from only 7% in 2014.

     Hyflux's order book stood at S$2.95 billion at the end of 2015, only 1% higher than a year ago. In October 2015, Hyflux and its partner Mitsubishi Heavy Industries agreed to develop and operate a waste-to-energy facility for Singapore's National Environment Agency. The project will cost around S$750 million and will be the largest waste-to-energy plant in Singapore. Hyflux will take a 75% stake in the project and Mitsubishi the rest.

     The business outlook for water projects is dim, as China's economic slowdown and lower oil prices weigh on emerging countries, particularly commodity-exporting economies. "Oil prices have come down to very low, and we are very cautious about the large municipal projects," said Hyflux's Executive Chairman and Group CEO Olivia Lum at a press conference on Thursday evening.

     Hyflux is diversifying into the retail sector. Last year, the company announced the acquisition of a 50% stake in PT Oasis, Indonesia's second-largest producer of bottled drinking water. Hyflux sees huge potential in Indonesia's large population and high dependence on bottled drinking water, Lum said.

     In November 2015, Hyflux announced an $8 million investment for a 30% stake in Kaqun Europe, a Hungary-based water technology company. Through a joint venture with Kaqun, Hyflux has launched oxygenated bottled water online in Singapore. Hyflux plans to launch the water in Indonesia and China after it has added production capabilities by the latter half of this year.

Source: Nikkei Asian Review

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• Treatment
• Desalination
• Development & Management