MISC’s 3Q earnings increase fivefold to RM680.5m

The rm’s offshore, LNG and heavy engineering segments help net pro t soar

By NG MIN SHEN / Pic By BLOOMBERG

A Marked improvement in MISC Bhd’s offshore, liquefied natural gas (LNG) and heavy engineering segments helped net profit soar fivefold for the third quarter (3Q) ended Sept 30, 2017.

The energy shipping group’s net profit hit RM680.5 million in the 3Q from RM134.2 million posted a year earlier, despite revenue for the quarter rising marginally to RM2.32 billion from RM2.29 billion registered the year prior.

The Petroliam Nasional Bhd-controlled company has proposed an interim dividend of seven sen per share for the quarter, to be paid on Nov 30, 2017.

Group operating profit was higher at RM678.1 million in the 3Q compared to RM310.7 million recorded a year ago, MISC noted in its exchange filing last Friday.

Revenue from its offshore segment rose 51.4% year-on- year (YoY) to RM399.9 million from RM264.2 million previously, with the “favourable adjudication decision on Gumusut-Kakap Semi-Floating Production System (L) Ltd variation works and construction revenue from floating, storage and offloading (FSO) vessel Benchamas 2, that commenced construction in January 2017”.

Operating profit climbed to RM313.2 million in the period from RM72 million last year, which MISC said was mainly from higher revenue and construction gain from FSO vessel Benchamas 2, coupled with impairment of finance lease receivables made in the corresponding quarter.

LNG revenue increased 16.2% YoY to RM709.2 million in the 3Q, with the lease of three new vessels.

Operating profit was higher at RM402.7 million versus RM237 million last year, due to higher revenue and lower vessel operating costs.

The group’s heavy engineering segment generated lower 3Q revenue of RM215.4 million compared to RM333.5 million

previously, mainly due to a lower backlog as most ongoing projects are nearing completion, as well as lower value, and number of LNG and tanker repairs in its marine sub-segment.

MISC’s heavy engineering business recorded an operating profit of RM16.4 million in the 3Q compared to a loss of RM1.8 million last year, mainly from lower loss following the finalisation of completed projects in the current period.

MISC’s petroleum segment saw lower revenue of RM1.03 billion versus RM1.06 billion previously, largely on lower earnings days and freight rates in the quarter under review.

The operating loss of RM59.7 million was higher at this division than the prior quarter’s loss of RM30.7 million, mainly due to lower revenue.

Operating profit from its remaining segments declined sharply to RM5.5 million from RM34.2 million a year ago, due to settlement of claims related to the disposal of MISC Integrated Logistics Sdn Bhd.

MISC said petroleum shipping demand continues to be affected by global production cuts in response to high crude inventory levels and low oil prices, exacerbated by the delivery of new tankers du- ring the year.

“Nevertheless, seasonal demand during peak winter months will end the year on a firmer note for the petroleum shipping sector,” it said.

Spot charter rates for LNG tankers remain sluggish, due to the tonnage oversupply situation led by higher vessel deliveries and older vessels coming off charter.

The rates are, however, expected to pick up as countries begin building up inventories to meet winter heating demand.

“The present portfolio of long-term charters in the group’s LNG shipping business will continue to support the financial performance of this segment,” MISC said.

The heavy engineering business remains committed to managing costs, optimising resources and improving operational efficiency to combat the challenging environment.

Replenishment of orderbook from the marine segment and offshore services is progressing and remains a priority.

“While the segment has successfully secured several ofsfhore fabrication projects during the period, the majority of the contribution will only be realised in 2018 and beyond,” the group said.

MISC noted projections for a more stable oil price environment will pave the way for a gradual recovery in investments in the global offshore exploration and production space, particularly for developments within the Atlantic Basin.

Although opportunities are limited, the group’s current long-term contracts in hand will support the financial performance of its offshore business division.