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MMHE sees tough competition for fabrication jobs in future

MMHE sees tough competition for fabrication jobs in future
While predicting that deferred projects would eventually be resumed, Malaysia Marine and Heavy Engineering (MMHE) is predicting intense competition in the oil and gas (O&G) offshore fabrication industry will persist, as players are now hungry to replenish their orderbook going forward, local reports said.

“But it will be a question of timing of when the next upcycle would be. I, however, think it will take a while for crude to return to the $100-per-barrel level. In the meantime, players are feeling the pangs of hunger. Some are willing to slash margins by chunks and even profitability,” MMHE chairman Nasarudin Md Idris was quoted as saying.

However, Nasarudin remains confident that MMHE's MYR1.6bn ($441m) worth of backlog jobs would provide earnings visibility up to the third quarter of 2016. He pointed out that mega-jobs such as the TLP Malikai, Malaysia's s first tension leg platform structure, and the SK316 engineering, procurement, construction, installation and hook-up/commissioning contract are not common.

With both projects nearing completion, MMHE is being pressured to top up its secured projects, and is ramping up its marketing activities overseas to keep its two yards, which have a current utilisation rate of just 50%, busy.

“We are spending judiciously on investments, as we need the cash to be ready when the market picks up. We are also mindful of our overheads being quite high with 3,800 employees.“Thus, we are splitting our main core businesses in offshore fabrication to be involved in related client management and business development to look out for more opportunities,” he said.

Nasarudin added that this has resulted in an increase in its tender book to MYR7bn, with 60% overseas projects, although the chances of actually landing jobs is getting tougher on the global level.

“We are quite competitive in some of the bids, but I still do not want to estimate the success rate under the prevailing market environment,” he said.Its overseas bids are mainly in the Middle East, Canada and Qatar. One of the two bids in Canada is Petronas-related. MMHE is a Petronas subsidiary.

“We are also looking at smaller projects now, but the market in this general segment is overly-crowded. There are about eight licensed fabricators in Malaysia.