As a result the company's second quarter net profit was slashed to MYR556.5m ($129.8m) from MYR1.35bn previously as the dynamic petroleum segment saw drops in revenue and an operating loss.
MISC said in a stock market announcement that revenue also fell to MYR2.30bn from MYE2.39bn previously as changing shipping patterns caused a 12% drop in revenue for the petroleum segment to MYR1.02bn on lower freight rates and charter days. As well, the heavy engineering segment saw turnover fall 14% to MYR257.3m as most projects are reaching completion.This in turn led to operating losses of MYR10.3m and MYR20.1m for the heavy engineering and petroleum sectors respectively, the former a widening of a MYR400,000 loss and the latter turning from a MYR58m profit previously.
The only bright spot was in the LNG sector, where revenue rose 16% to MYR730m and pre-tax profit more than doubled to MYR557.7m on recognition of compensation for early termination of a time charter contract and lease commencement of two vessels.
Looking ahead, these adjustments are expected to continue, "impacted by the OPEC and non-OPEC production cuts, rising drilling activity in the US and uncertainty over Libyan and Nigerian production", MISC said ."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," MISC added.
On the LNG shipping market, MISC said it "continues to be affected by newbuilds delivery and expiry of older vessel charters, which has depressed spot rates"."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," MISC noted, adding that it expected the offshore segment to continue to experience stable financial performance "due to its long term contracts in hand".
Alluding to the serious issues in the beleaguered heavy engineering segment, MISC said: "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."
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