High costs, impairment hit MISC’s 4Q17 earnings

The O&G support service provider’s revenue for the quarter declined 3.6% YoY to RM2.4b

By MARK RAO / Pic By www.misc.com.my

MISC Bhd noted high vessel operating costs and impairment of receivables brought down the company’s liquefied natural gas (LNG) division and impacted earnings.

The oil and gas (O&G) support service provider, controlled by Petroliam Nasional Bhd, posted a net profit of RM68.2 million for the fourth quarter ended Dec 31, 2017 (4Q17), compared to a net profit of RM529.8 million posted in the same period a year earlier, despite the commencement of lease of two new vessels.

MISC’s revenue for the quarter declined 3.6% year-on-year (YoY) to RM2.43 billion as the oversupply situation in the LNG industry continues to hit the industry.

“The difficult market will continue and the LNG shipping segment will face ongoing tonnage of oversupply,” the company noted in a Bursa Malaysia filing yesterday.

The group continues to rely on its present portfolio of longterm time charters to provide it the stability of profits and cashflow during the year, it added.

The recovery in the global energy prices over the long term could also help drive the global revival of upstream projects.

“It will shape a robust and healthier outlook for 2019, assuming final investment decisions are taken throughout 2018,” it said.

For the full financial year of 2017 (FY17), MISC’s revenue rose 4.6% YoY to RM10.04 billion on higher contributions from the LNG and offshore businesses, despite net profit falling 23.2% to RM1.98 billion.

This was offset by the group’s petroleum division which turned in lower revenue and operating profit owing to the lesser earnings days and lower freight rates, coupled with higher bunker costs recognised over the year.

Turnover from the heavyengineering segment was also lower due to projects being completed, while new projects are still in their early stages and the lower value of vessel repairs in the marine subsegment.

MISC believes the tonnage oversupply and production cuts undertaken by OPEC last year will continue to weigh on the petroleum shipping segment in 2018.

“A smaller orderbook for tankers, as well as the robust oil demand projections amid the declining global crude inventory will help balance out the supply and demand for tankers,” it said.

MISC’s heavy-engineering segment on the other hand will focus on cost management, optimising resources and strengthening its position in the existing markets and seek to expand into new market segments.

“This segment is expected to contribute positively to its revenue in 2018 and beyond as it has successfully secured several offshore fabrication projects during the period.”

MISC approved a nine sen dividend for the quarter, bringing the total dividends declared for FY17 to 30 sen. The nine sen dividend will be paid out on March 15 this year.