MISC announced its financial results for the financial period ended 30 June 2017.
- Group revenue for the quarter ended 30 June 2017 was lower than the corresponding quarter ended 30 June 2016.
- Group revenue for the 6 months period ended 30 June 2017 was higher than the corresponding 6 months period ended 30 June 2016.
- Group profit before tax for the quarter and the 6 months period ended 30 June 2017 was lower than the corresponding quarter and 6 months period ended 30 June 2016.
Group Revenue, Operating Profit and Profit Before Tax for the Quarter Ended 30 June 2017
Group revenue for the quarter ended 30 June 2017 of RM2,302.5 million was 3.8% lower than the corresponding quarter’s revenue of RM2,392.4 million. The decrease in Group revenue was mainly due to lower freight rates and earning days for Petroleum segment as well as lower revenue from Heavy Engineering segment as most on-going projects are nearing completion.
The consolidation of Gumusut-Kakap Semi-Floating Production System (L) Limited (“GKL”) following completion of its equity buyback in May 2016 and higher variation works following GKL’s favourable adjudication decision has however mitigated the decrease in revenue for the current quarter. Additionally, construction revenue from Floating, Storage and Offloading Vessel (“FSO”) Benchamas 2 and lease commencement of Marginal Marine Production Unit (“MaMPU”) in Q4 FY2016 have also contributed to the increase in revenue in the Offshore segment. Furthermore, lease commencement of two new LNG vessels have also mitigated the decrease in revenue mentioned above.
Group operating profit of RM717.4 million was higher than the corresponding quarter’s profit of RM500.3 million mainly due to recognition of compensation for early termination of a time charter contract and lease commencement of two new LNG vessels.
Group profit before tax of RM558.7 million was lower than the corresponding quarter’s profit before tax of RM1,374.1 million, as the latter included net gain on acquisition of subsidiaries of RM847.3 million, recognition of intangibles of RM47.5 million and higher share of profit from joint ventures.
Group Revenue, Operating Profit and Profit Before Tax for the 6 Months Period Ended 30 June 2017
Group revenue for the 6 months period ended 30 June 2017 of RM5,287.4 million was 10.5% higher than the corresponding 6 months period ended 30 June 2016 revenue of RM4,786.9 million. The increase in revenue were mainly due to the consolidation of GKL beginning 1 May 2016 following the completion of 50% of its equity buyback and higher variation works following GKL’s favourable adjudication decision. Furthermore, commencement of the construction revenue from Floating Storage and Offloading Vessel (“FSO”) Benchamas 2, lease commencement of Marginal Marine Production Unit (“MaMPU”) and two new LNG vessels have also contributed to the increase in revenue.
Petroleum and Heavy Engineering segments however recorded lower revenue over the 6 months period. Petroleum segment from lower freight rates and earnings days whilst Heavy Engineering due to most major projects are nearing completion while new secured projects are still at their early stages as well as lower value of LNG vessel repairs.
Group operating profit for the 6 months period ended 30 June 2017 of RM1,398.7 million was 5.2% lower than the corresponding 6 months period ended 30 June 2016 operating profit of RM1,475.9 million, as the latter included recognition of compensation for early termination of time charter contracts for two LNG vessels.
Group profit before tax for the 6 months period ended 30 June 2017 of RM1,255.3 million was 41.7% lower than the corresponding 6 months period ended 30 June 2016 profit before tax of RM2,154.9 million. This is mainly due to corresponding period’s profit included net gain on acquisition of subsidiaries of RM847.3 million, recognition of intangibles of RM47.5 million and higher share of profit from joint ventures.
The global oil market rebalancing is expected to continue, impacted by the OPEC and non-OPEC production cuts, rising drilling activity in the United States and uncertainty over Libyan and Nigerian production. In addition to production cuts, drawdown of crude oil and products inventory continue to dampen demand for petroleum tankers in the immediate term. Freight rates are also being pressured by high fleet growth in 2017. Nonetheless, vessel demand generally improves with the year-end seasonal demand.
Meanwhile, the LNG shipping market continues to be affected by newbuilds delivery and expiry of older vessel charters, which has depressed spot rates. However, this will have limited impact on the steady performance of the Group’s LNG business segment due to its present portfolio of long term charters in place.
As the oil market rebalances, a more stable oil price environment will pave the way for a gradual recovery in global offshore oil and gas investment. Notwithstanding the limited opportunities present, the offshore segment will continue to experience stable financial performance due to its long term contracts in hand.
In the Heavy Engineering segment, the business will focus on diversifying into new revenue streams while efforts to replenish the order book continues. At the same time, cost management, resource optimisation and operational efficiency will remain an on-going priority. While Heavy Engineering has successfully secured several contracts during the period, the impact may not be seen immediately and majority of the contribution will only be realised in 2018 and beyond.
MISC’s President/Group Chief Executive Officer, Mr. Yee Yang Chien said
“Amidst difficult market conditions, the recent positive accomplishments during the second quarter of 2017 reflect MISC’s resilience in demonstrating positive financial results and excellent operational performance. We aim to continue to drive for sustainable growth, guided by our five-year business plan, MISC2020.”
“Despite the prevailing challenges in both the oil and gas as well as the shipping industry, MISC continues to record positive developments, focusing our growth on our portfolio of maritime and offshore related assets that are secured under long term employment/contract with quality customers/counterparties. Our strong financial position allows us to allocate our capital and human resources towards building value in our existing businesses, as well as in strengthening the quality of our income. Nonetheless, we shall continue to remain vigilant on cost management. As we strive to fulfill our aspiration of consistently providing better energy-related maritime solutions and services, MISC will capitalise on timely investment opportunities to ensure we are able to grow in a more energised and sustainable manner,” Mr. Yee Yang Chien added.