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Nam Cheong Q1 earnings hit by cancellation of vessel by Perdana

Nam Cheong Q1 earnings hit by cancellation of vessel by Perdana
Malaysia’s OSV builder Nam Cheong has been hit by a reversal of revenue and a net loss in the first quarter of 2016, due mainly to a contract cancellation on a vessel that is in an advanced stage of construction.

In the quarter ended 31 March 2016, Singapore-listed Nam Cheong reported a loss of RMB40.15m ($9.98m) as against the profit of RMB39.3m in the same period of 2015.

The offshore vessels builder also registered a negative revenue of RMB93.08m during the quarter, a reversal from the revenue of RMB326.3m in the previous corresponding period.

The lower topline was mainly due to the reversal of revenue from Perdana Petroleum cancellation of an accommodation work barge (AWB), which is already at an advanced stage of construction. And as a result of adverse foreign exchange movement, Nam Cheong slipped into the red.

“Admist a weak O&M environment, the progress of vessel sales and shipbuilding has remained slow,” said Tiong Su Kouk, executive chairman of Nam Cheong.

“Additionally, during the quarter, we were notified of a contract cancellation by Perdana for an AWB which was sold in June 2014. However, a 20% deposit of $8.4m has been forfeited by Perdana in favour of Nam Cheong,” Tiong explained.

“Apart from this isolated case, we have not faced any customer requests for cancellations. We will continue to maintain close and constant communication with all customers to keep abreast of developments, while tapping on pokctes of demand trends for the potential sale of this AWB,” he added.

The lower number of vessel deliveries during the first quarter also affected the group’s revenue. One vessel was delivered during the quarter compared to six delivered in the same quarter of 2015.

Nam Cheong has an orderbook of approximately RMB1.1bn as at 31 March 2016, comprising a mix of OSVs due for deliveries up until 2018.