Sapura Energy dented by high tax, low utilisation rates

KUCHING: Sapura Energy Bhd’s (Sapura Energy)’s core net profit of RM28 million in the first quarter of financial year 2018 (1QFY18) came in below expectations, accounting for 10 per cent of analysts’ earlier estimates.

This comes as the group took a hit from the huge 1QFY18 effective tax rate of 74 per cent as tax benefits from the group’s profitable operations was unable to offset other subsidiary losses.

However, AmInvestment Bank Bhd (AmInvestment Bank) said Sapura Energy’s operational performance was roughly in line with its expectations as 1QFY18 pre-tax profit of RM104 million accounted for 33 per cent of its forecast and 30 of consensus forecasts.

“As a comparison, Sapura’s 1QFY17 pre-tax profit accounted for 32 per cent for FY17. The group did not declare any interim dividend as expected,” it added.

Quarter on quarter, Sapura Energy’s 1QFY18 revenue slid by two per cent to RM1.8 billion, largely from a 20 per cent reduction in oil production from its exploration and production ( E& P) division together with lower rig utilisation as only seven rigs were in operation versus eight in 4QFY17.

“During the quarter, only seven rigs were in operation with T-10, T-11, T-19, T-20, Setia and Menang stacked together with semi-tenders Jaya and Alliance,” it said, adding that Teknik Berkat was scrapped recently, reducing the fleet to 15 rigs.

“However, the group’ s normalised 1QFY18 pre-tax profit fell 34 per cent on a quarterly basis to RM104 million, largely from the E&P and lower drilling utilisation rate.”

AmInvestment Bank said the sequential decline would have been larger if not for the stronger performance from the Engineering and Construction segment, which turned around to a 1QFY18 pre-tax profit of RM181 million versus an impairmentdriven loss of RM38 million in 4QFY17.

The higher effective tax rate of 74 per cent further widened the 65 per cent quarter on quarter plunge in 1QFY18 normalised net profit. Management has guided that subsequent tax rates should improve and the final full FY18 tax rate may be similar to 46 per cent in FY17.

“With contract wins of RM1.3 billion since February this year, the group’s order book has risen slightly to RM17 billion, of which RM4.9 billion will be recognised for the remainder of FY18 forecasts,” it added.

“While order flows remain slow, the group is hopeful for further wins with tender prospects worth US$8.2 billion (about RM35 billion).

Sapura Energy’s operational performance was roughly in line with its expectations as 1QFY18 pre-tax profit of RM104 million accounted for 33 per cent of its forecast and 30 of consensus forecasts.