Singapore-listed Nam Cheong released the statement of comments by its auditors, BDO LLP, to the Singapore Exchange (SGX) on 17 March.
The auditors drew attention to Nam Cheong experiencing a significant decrease in revenue for 2016 and incurred a loss of around MYR42.77m ($9.64m).
“As at 31 December 2016, the group’s loans and borrowings that were classified as current amounted to MYR948,720,000 of which MYR278,566,000 pertained to medium term notes that are due for repayment on 28 August 2017,” the auditors report mentioned.
“These amounts exceeded the group’s cash and cash equivalents of MYR162,618,000 as at 31 December 2016,” the report said, adding that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.”
Nam Cheong explained that its 2016 loss was due to deferment of the delivery of vessels that had been requested by several customers. “The current downturn in the oil and gas industry may continue to add pressure to the group’s financial performance and its operating cash flows,” the company stated.
It added that the company’s ability to continue as a going concern is “highly dependent on the successful implementation of the debt restructuring plan as well as continued support from its bankers and creditors.”
The offshore vessels builder bases a main portion of its business model on build-to-stock, which offers buyers significantly shorter waiting time to secure a vessel albeit at higher prices in order to meet often urgent offshore jobs.
But the current quiet state of the sluggish offshore market has left Nam Cheong scrambling to secure buyers and charterers for its ready stocks. According to data from VesselsValue, Nam Cheong has 56 OSVs due for deliveries this year, adding on to 18 vessels that were previously not delivered.
“The group continues to look for potential buyers and charterers for its fleet of vessels and has also tightened cost controls over various operating expense, including deferring certain construction projects, so as to improve its cash flow positions,” Nam Cheong said.