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Nam Cheong back in the black as OSV charter market recovers

More signs of recovery continue to emerge from the offshore sector with Malaysian offshore supply vessel (OSV) player Nam Cheong finally emerging from debt and returning to profitability in the first half.

Group ceo Leong Seng Keat cited forecasts that oil prices would average $71 this year and $68 in 2019 as an encouraging sign and saw some opportunities ahead.

“We have observed a gradual improvement in oil prices, signaling a bottoming out from the low of between $30–$35 per barrel in 2015. Whilst the near-term weakness in the offshore and marine sector is expected to persist, we see pockets of opportunities for vessel chartering for exploration and production works. We have positioned ourselves, premised on our established presence in this business segment since 2007, in preparation of further market consolidation and a possible increase in charter rates, in line with this nascent stage recovery in the oil and gas industry.”

The vessel chartering segment in particular saw a strong recovery, with revenue jumping 35% to MYR36.9m ($9.0m) in the first half from MYR27.3m previously, mainly due to an increase in utilisation rate and the addition of new vessels to the chartering fleet during the second quarter ended June 30, 2018.

Leong said: “Since 2017, we started to focus on optimising our idle assets through vessel chartering by setting up our own full-fledged chartering operation, and have established our position as a key player in the Malaysian chartering market. We are pleased to have made good headway and this strategy has already yielded results.”

Read More: An improving picture for offshore?

Revenue from Nam Cheong’s bread and butter shipbuilding segment however was 30% lower at MYR98.8m in the first half, compared to MYR141.8m in the previous corresponding period, notwithstanding the sale and delivery of two vessels in both both periods respectively.

Overall however, the group’s first half revenue fell by a fifth to MYR135.7m from MYR169.1m in the previous corresponding period, due mainly to lower shipbuilding revenue recognised, although gross profit margin improved 2.0 percentage points to 13.0%, compared to 11.0% over the same period.

But a waiver of the group’s debts amounting to MYR557.5m returned it to profitability with a first half net profit of MYR559.6m from a loss of MYR2.1bn in the previous corresponding period.

Executive chairman Tiong Su Kouk said: “We are encouraged that our debt issue is now largely behind us, having crossed many hurdles during the restructuring exercise. We are also very grateful for the strong support and trust of our creditors, which is a clear vote of confidence in our management team and the Scheme of Arrangement.”

He concluded: Whilst we have made significant progress in our restructuring efforts, we recognise that industry challenges remain. Cost and capital structure optimisation remains a top priority and we will continue to tighten control for sustainable long-term growth.”

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