MMHE net loss widens to RM119.67 mln in 4Q16, dragged by lower backlog and order intake
KUCHING: Malaysia Marine and Heavy Engineering Holdings Bhd’s ( MMHE) net loss for the fourth quarter of 2016 (4Q16) widened to RM119.67 million from RM27.13 million recorded in 4Q15.
The company in its notes filed to Bursa Malaysia yesterday said it registered a higher loss in 4Q16 due to lower operating profit and higher impairment being recognised in the quarter.
The group’s higher loss was due to recognition of impairment on assets amounting to RM140.5 million in 4Q16.
Additionally, MMHE noted 4Q16 revenue fell by 58 per cent year- on-year (y- o-y) to RM303.64 million from RM721.14 million generated in 4Q15.
Elaborating further, MMHE said the company’s heavy engineering division registered lower revenue by 63 per cent against previous year as a result of fewer and lower backlog and order intake.
Thus, the company noted an operating loss of RM107.7 mi l l ion was recorded as compared to RM9.2 mi l l ion profit in the corresponding year due to insufficient revenue and contribution to absorb the group’s overhead.
Despite lower revenue against corresponding year, MMHE observed that its marine’s operating profit was higher at RM88.5 million as compared with RM81.6 million in the corresponding year due to higher profit contributed by the liquefied natural gas ( LNG) and floating, production, storage and offloading ( FPSO) conversion works, which offered better profit margin as compared to other categories.
For financial year 2016 ( FY16) ended December 2016, the group registered a loss before tax of RM135.0 million against profit before tax of RM22.5 million in FY15 due to lower contribution from heavy engineering division, net foreign exchange loss as compared with gain in the previous year as well as the impact from recognition of higher impairment on assets in FY16.
The company observed that FY16 revenue decreased by 52 per cent y- o-y to RM1.19 billion from RM2.46 billion generated in FY15.
Nonetheless, MMHE said it will continue with its efforts on cost management and resource optimisat ion to reduce its operating cost in line with the outlook of the industry.
Commenting on the group’s prospects, MMHE opined that although an agreement was reached by the Organisation of Petroleum Exporting Countries (OPEC) and non- OPEC members to reduce their countries output from January 1, their commitment to honour the pact remains to be seen.
It bel ieved nat ional oi l c ompa n ie s ( NOCs) and international oil companies ( IOCs) are expected to adopt the same strategy on deferment and scale- down of upstream projects for the major part of the year.
Coupled with geopolitical risk, MMHE opined any meaningful recovery in the demand for offshore structures is not anticipated to materialise until 2018 at least.
In addition, MMHE said the group intensifies its effort to replenish its orderbook, namely from onshore segment, hook-up and commissioning and facilities improvement.