Boustead Heavy Industries positive of returning to the black in 2019

By NG MIN SHEN / Pic By ISMAIL CHE RUS

Boustead Heavy Industries Corp Bhd (BHIC) is positive on returning to profitability this year, aided by a strong orderbook, potential new businesses and the absence of large provisions.

BHIC, a subsidiary of Boustead Holdings Bhd which is controlled by the Armed Forces Fund Board, posted a net loss of RM469.2 million in the financial year ended Dec 31, 2018 (FY18) versus a net profit of RM690.14 million in FY17.

BHIC deputy executive chairman and MD Tan Sri Ahmad Ramli Mohd Nor said the group’s performance in FY18 was hit by provisions and impairments in its heavy industries division.

“We’re positive (on 2019). In 2018, we made profits in the first three quarters, but in the last quarter, we had to conform to the accounting standard which dictates that whatever we spend, we have to recognise.

“And there was a lot of spending on the variation orders requested by the government, so we had to take that into account,” he told reporters after the company’s AGM in Petaling Jaya yesterday.

Presently, BHIC — which specialises in shipbuilding, ship repair, heavy engineering and fabrication, and defence services — is negotiating with the authorities for additional costs incurred under the variation orders.

“The provisions were for work done by the original equipment manufacturer which we have to pay (for). We have to spend because we have to carry on doing the work under the contracts, (although) we’re not getting what we’ve spent. That has been delayed.

“The variation orders from the government are in the process of being finalised. So, if things work out, we could expect a writeback if possible,” Ahmad Ramli said.

Apart from the expected absence of impairments this year, the group also expects to leverage on its orderbook, which stood at RM4.3 billion as at March 31, 2019, and is expected to buffer the group up to 2023.

Year-to-date, the group has received contracts from the Royal Malaysian Navy (RMN) for maintenance, repair and overhaul (MRO) of ships and in-service support for submarines.

It has also received a letter of intent for an integrated logistics support contract for the littoral combat ship project, which it hopes to finalise in the next few months.

The company is also in discussions with the government for an extension of its RM62.58 million helicopter MRO contract with the Malaysian Maritime Enforcement Agency, which will end in mid-2019.

“We are poised to take on more jobs for the government. If it’s MRO work, we’re already there — we have been maintaining RMN ships. If the government wants to build ships, we have the expertise — we have a dedicated design centre,” Ahmad Ramli said.

He added that the company is looking at penetrating regional markets, after receiving interest from several parties at the Langkawi International Maritime and Aerospace Exhibition 2019 held last month.

The group is also exploring new business opportunities domestically as well as overseas, although Ahmad Ramli declined to reveal further details.

Shares of BHIC closed four sen or 3.03% lower at RM1.28 yesterday, valuing the company at RM318.03 million.