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MISC’s 3Q profit halves on absence of one-off gain, weaker LNG and heavy engineering segments

Tuesday, 20 November 2018 | 00:00

MISC Bhd’s net profit for the third quarter ended Sept 30, 2018 (3QFY18) halved to RM341 million from RM680.5 million a year ago, mainly because the previous year had recorded a one-time gain from a favourable adjudication decision, and construction profit from a floating storage and offloading (FSO) vessel.

A 38% decline in operating profit from its liquefied natural gas (LNG) division, and the operating loss recorded in its heavy engineering division — versus an operating profit in the year-ago quarter — also contributed to the weaker 3QFY18 earnings, its stock exchange filing today showed.

The lower LNG division operating profit was due to lower revenue from lower earning days and lower charter rate after the renewal of an LNG carrier’s contract; the previous year also recorded a one-time reimbursement from a charterer. The heavy engineering division, meanwhile, was impacted by additional cost provisions made for ongoing projects, and additional costs incurred on conversion works and compressed margins for dry docking activities.

But the largest decline was recorded in the group’s offshore division, where operating profit fell 55% to RM139.9 million, as the previous year had benefited from the one-time gain from the favourable adjudication decision on Gumusut-Kakap Semi-Floating Production System (L) Ltd (GKL) variation works in August 2017, and construction profit from the FSO Benchamas 2.

The group’s 3QFY18 revenue slipped 4% to RM2.23 billion from RM2.32 billion a year ago as its LNG division and offshore divisions contributed less, though these were mostly offset by stronger contributions from its heavy engineering and petroleum divisions. The group announced a third interim dividend of 7 sen per share for FY18, which amounts to RM312.5 million, payable on Dec 18.

For the cumulative nine months period (9MFY18), the group’s net profit shrank 49% y-o-y to RM972.8 million from RM1.91 billion, while revenue retreated 16% to RM6.39 billion from RM7.6 billion.

Going forward, the group is anticipating that the petroleum tanker market will see a rise in seasonal demand during the upcoming winter months. Slowing newbuilding orderbook and continued scrapping of older tankers are additional, immediate-term support factors.

“Over the longer term, growth in tonne-miles that is driven by rising movement of oil from the Atlantic region to Asia suggests a more robust outlook in charter rates,” it added.

In the LNG side, MISC said its shipping unit will take advantage of buoyant market conditions to lock-in higher charter rates for two to three of its vessels which are in the spot market.

Outlook for the offshore segment, meanwhile, continues to be positive, the group said, as a growing number of floating production system contracts are expected to be awarded over the coming years, supported by healthy oil and gas exploration and production activities. “Growth in income is expected in 2019, arising from full year contribution of two new assets added in 2018 — FSO Benchamas 2 and FSO Bergading.”

As for heavy engineering, the group expects a pickup in marine repair activities in the coming year, and is optimistic of maintaining current level of repair activities for the final quarter of the year, as it works on replenishing its order book.

MISC shares today closed 1 sen higher or 0.15% at RM6.60, with a market capitalisation of RM29.46 billion.
Source: The Edge Markets

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