Impairment, finance costs weigh on MISC bottom line

PETALING JAYA: MISC Bhd’s net profit slid 26.2% to RM249.9 million in the fourth quarter ended Dec 31, 2019 against RM338.7 million reported in the same quarter a year ago, due to higher finance cost and impairment loss on ships, offshore floating assets and other investments.

Revenue for the period was marginally down by 0.5% to RM2.38 billion, from RM2.39 billion previously.

MISC has declared a dividend of 12 sen comprising an interim dividend of 9 sen and a special dividend of 3 sen.

According to the group’s Bursa filing, its LNG segment reported an operating profit of RM269.3 million for the quarter, representing a 44.6% increase, thanks to higher number of operating vessels.

The petroleum business’ operating profit rose 57.8% to RM171.4 million from RM108.6 million, mainly due to higher margin on freight rates.

The offshore business recorded an operating profit of RM97.5 million, a decline of 20.3% from RM122.3 million, mainly due to the recognition of additional demobilisation cost.

For the heavy engineering business, its operating profit stood at RM2 million, an improvement from a loss of RM30.3 million previously, mainly due to improved margin in the marine sub-segment coupled with lower unabsorbed overhead costs.

For the full financial year 2019, MISC’s net profit rose 8.8% to RM1.43 billion from RM1.31 billion a year ago, while revenue stood at RM8.96 billion, a 2.1% increase from RM8.78 billion.

Looking ahead, MISC expects the tanker market to remain firm in 2020 due to fewer deliveries and growing long-haul prospects as well as demand growth arising from the International Maritime Organisation 2020 (IMO 2020) sulphur cap implementation.

“However, the recent Covid-19 virus outbreak has posed some risks to the oil and tanker market, and whilst the impact is currently uncertain, the tanker market could face short-term headwinds if the outbreak is not contained or if the situation escalates.”

For the LNG shipping segment, MISC noted that the liquefaction expansion in North America and the Middle East is expected to lead to an increased requirement for vessels and this should support charter rates going forward.

Nonetheless, the group pointed out its present portfolio of long-term charters will underwrite the steady performance of MISC’s LNG business segment, and the two longterm contracts secured in Q4’19 will provide growth in future years.

It noted that the resurgence in offshore oil and gas projects is set to continue its upward trajectory in 2020 with oil prices remaining relatively stable.

“While there is an increase in offshore activities, the heavy engineering segment remains prudent on the outlook for its business in the near term amidst uncertainties on the timing of capital spending by major oil and gas players.”