MISC blamed the decrease in revenue for the quarter on its heavy engineering business which saw fewer and lower value of projects in progress and lower number of rig repairs and conversion works in its marine sub-segment.
The LNG business also recorded a decrease in revenue from operating a smaller fleet of vessels and lower charter rates earned on new contracts. However, with the completion of the 50% equity buyback of Gumusut-Kakap Semi-Floating System Ltd (GKL) on 13 May 2016, GKL’s results have been fully consolidated from the said date, mitigating the decrease in revenue for the current quarter, MISC said in a press release.
MISC president and group ceo Yee Yang Chien said: “The second quarter showed mixed results that are impacted by lower contribution from our heavy engineering and LNG businesses. Nonetheless, balancing the scale, the completion of the acquisition of GKL as well as steady contribution from our petroleum business have contributed to strengthening our financial position considerably.”
For the first half, revenue of MYR4.79bn was 6% lower than the MYR5.09bn taken in the previous corresponding period. The extraordinary gain also helped boost net profit in the period to MYR2.15bn from MYR1.28bn previously.
Revenue fell across three main segments comprising heavy engineering, LNG and offshore, but the petroleum business managed to do relatively well over the first six months.
First half group operating profit however rose by almost a third to MYR1.48bn from MYR1.14bn previously, mainly from recognition of compensation for early termination of time charter contracts for two LNG vessels, reversal of provision for a legal suit in the current period and improved freight rates in the petroleum business. However, the group also recognised impairment provisions in its offshore business and losses in its heavy engineering business from lower revenue in the first six months of this year.
First half LNG segment operating rose to MYR999.5m from MYR766.9m, petroleum segment profit rose to MYR279.4m from MYR187.1m but offshore segment saw profits plunge to just MYR2.1m from MYR181.6m previously while the beleaguered heavy engineering division fell to a MYR3.9m loss from an already small MYR57.3m profit previously.
Looking ahead, Yee said: “Moving forward, we expect no less than a challenging year ahead with the current slump in the global oil and gas sector. However, our priorities remain unchanged and the future growth of MISC will be guided by our five-year business strategy towards attaining a sustainable level of secured profits by FY2020. For this purpose, our emphasis is on advancing the growth of our four core business segments in LNG, petroleum, offshore and heavy engineering businesses.”
MISC noted that the high global stock level is expected to dampen demand for the movement of crude oil in the immediate term. It warned that together with projected larger delivery of new petroleum tankers in the second half of 2016, freight rates may come under some pressure, although this will be compensated by rising seasonal demand towards the end of the year.
Meanwhile, the market for LNG vessel spot charter remains weak due to the escalating oversupply of vessels. This negative outlook is expected to remain throughout the year. On a positive note however, the group’s present portfolio of long term charters should help produce a steady financial performance for MISC’s LNG fleet for the rest of the year, the group said.
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