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MMHE stages turnaround with 1Q net profit of RM6.1m

Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) posted net profit of RM6.10mil in the first quarter ended March 31,2020, a turnaround from the net losses of RM29.36mil a year ago.

The energy industry and marine solutions provider reported on Wednesday at the operating profit level, the group reported a turnaround mainly due to higher revenue and improved performance in both segments.

Its revenue rose by 70.6% to RM346.44mil from RM203.11mil a year ago. Earnings per share were 0.4 sen compared with loss per share of 1.8 sen.

“Both heavy engineering and marine segments contributed to the improvement in the revenue, ” it said.

MMHE said heavy engineering’s revenue of RM226.80mil increased by 80.8% from RM125.40mil a year ago, mainly contributed by higher revenue from on-going projects.

The segment reported an operating profit of RM1.2mil versus an operating loss of RM23.90mil a year ago, mainly due to reversal of cost provisions in the current quarter.

The segment successfully completed the construction of FSO Golden Star External Turret for its client.

The ongoing projects for the heavy engineering segment include the engineering, procurement, construction, installation and commissioning (EPCIC) of the centralised processing platform (CPP) for Bokor Phase 3 Re-Development Project, Pluto Water Handling Module project.

It was also continuing, EPCIC works for the Kasawari Gas Development Project; the engineering, procurement, construction and commissioning (EPCC) of Bergading Mercury Removal Unit (MRU) module for Bergading Central Processing Platform-MRU Integration Project.

It was also involved in the EPCIC of supply and installation of new BEDPA and BEDP-B WHP for Bekok Oil Project.

MMHE said its marine segment rose 54% to RM119.70mil from RM77.70mil mainly contributed by the increase in revenue from LPG vessels and conversion work.

Due to the higher revenue, operating loss for the segment fell to RM1.5mil in the current quarter compared with RM7.5mil loss a year ago.

The marine segment completed the repair and maintenance of 15 vessels of various categories, of which two were repairs on LNG carriers.

The group’s total assets for 1Q was RM3.4bil and total equity RM2.4bil.

MMHE managing director and CEO Wan Mashitah Wan Abdullah Sani said the COVID-19 pandemic had caused global demand and oil prices to plummet at an unprecedented rate.

She said most oil majors have started reducing their annual capital spending and revising their investment plans to counter the negative financial impact amidst the grim landscape.

The subsequent oil production cut agreed by OPEC+ to mitigate the oil price crash did not result in any significant recovery in prices.

“We expect the risks of deferments and scale-down of upstream projects to prolong and continue to pose challenges to the industry for the remainder of the year. In light of the risks, we remain cautious on the remaining opportunities despite Petronas’ announcement of its intention to maintain domestic capital spending plans, ” she said.

Wan Mashitah said whilst demand for oil storage including floating storage and tankers appears to have increased from the oil supply overhang, the outlook for marine repairs and dry-docking activities remains uncertain.

“Charter hire rates are expected to remain volatile amidst declining prospects for the global shipping and trade activities due to the current pandemic and oil price crash.

“Demand for LNG which has been a contributing factor to growth in marine repair activity is also expected to experience a slowdown due to a significantly weakened economic outlook.

“We continue to focus on optimising our costs whilst improving project delivery and execution in order to maintain margins in the marine segment in this challenging market environment, ” she added.

As for the impact from the movement control order (MCO), she said MMHE’s activities at the yard had been suspended to comply with the MCO and it was only granted approval on April 16 to operate at limited capacity during the MCO.

Subsequently, on April 28, the Malaysian Government announced that companies granted approval to operate during MCO are now allowed to increase their workforce to full capacity with no restriction on operating hours.

“However, it remains uncertain to date how business operations will be conducted during and after the MCO since the impact both domestically and internationally has yet to be ascertained as many other countries are also currently in or have just lifted their lockdowns.

“We expect significant disruptions to the global supply chain and logistics which may potentially impact the supply of materials, equipment and resources related to the execution of the projects we have in hand. This may lead to sourcing for alternatives which may have cost and schedule consequences, ” she said.

Wan Mashitah said due to the current crisis, MMHE faced significant risks to our financial results and position including potential impairment of assets.

“However, at the present time, we are unable to fully assess and quantify the impact as discussions are still ongoing with clients and key stakeholders on the way forward.

“Furthermore, our ability to assess the impact is made more difficult due to the extremely fluid global situation riddled with uncertainties, ” she added.
Source: The Star

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