MISC’s 4Q earnings fall on higher finance cost, impairment loss


MISC Bhd stated higher finance cost and impairment loss on ships, offshore floating assets and other investments as the factors behind its earnings falling 26.2% year-on-year (YoY) to RM249.9 million in the fourth quarter ended Dec 31, 2019 (4Q19).

The drop in profit was also due to lower share of profit of joint ventures and higher impairment of assets in the current quarter coupled with recognition of a gain on acquisition of a business in the corresponding quarter.

Revenue for the quarter fell marginally by 0.54% YoY to RM2.37 billion due to lower number of operating vessels in the petroleum segment in the quarter, but was offset by the uplift in the liquefied natural gas (LNG) segment, following redeployment of vessels previously on charter suspension and acquisition of two LNG carriers in December 2018 and January 2019 respectively.

Despite the fall in earnings, the group declared a fourth tax-exempt dividend of nine sen totalled RM401.7 million and a special tax-exempt dividend of three sen payable March 17, 2020, bringing a yearly total dividend of 33 sen.

MISC president/group CEO Yee Yang Chien (picture) said the group’s performance is clearly reflected in its ability to generate a 36.1% increase in operating cashflow YoY.

“Taking into consideration our current capital commitments and foreseeable new investment opportunities, we are able to return some surplus cash to our shareholders in the form of the special dividend together with the quarterly dividend.

“Unique to the MISC Group, we continue to see new investment opportunities before us, despite the backdrop of an uncertain global growth outlook. We intend to ride this tailwind with the mission to further accelerate our growth in 2020,” he said in a statement yesterday.

For the cumulative 12 months, MISC’s net profit increased 8.75% YoY to RM1.43 billion, while revenue was up 2% YoY to RM8.96 billion.

On its prospects, MISC stated the petroleum shipping segment was able to reap some of the benefits of the robust albeit volatile market and ended the year on a stronger note.

“The tanker market is widely expected 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.

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

In the LNG shipping segment, MISC noted spot rates ended the year lower compared to the previous year mainly due to lack of demand owing to mild winter and high inventories.

“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.

“The group’s present portfolio of long-term charters will underwrite the steady performance of MISC’s LNG business segment, and the two long-term contracts secured in 4Q19 will provide growth in future years,” it said.

MISC said the resurgence in offshore oil and gas projects is set to continue in 2020 with oil prices remaining relatively stable.

“The floating production system market will likely remain robust with an increasing number of contract awards in the next few years, and MISC’s offshore business unit will continue to assess the merit of pursuing these opportunities.

“The unit’s existing portfolio of long-term contracts will continue to support the stable financial performance of the offshore business segment,” it said.

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

“The segment is cautiously optimistic on the outlook for the marine business in view of the expected global LNG expansion driven by an increase in exports from Qatar, Australia, Russia and the US to the Asia-Pacific market and expects no further deferment of dry-docking activities by shipowners in 2020 in relation to IMO 2020 implementation.

“The heavy engineering segment remains committed to replenishing its order book by expanding its footprint in various geographical areas and diversifying into new business opportunities,” it said.

MISC’s shares closed 13 sen lower at 7.88, valuing the company at RM35.17 billion.