The impairment is deemed necessary in anticipation of a prolonged recovery in the industry
by SHAHEERA AZNAM SHAH/ pic credit: mhb.com.my
MALAYSIA Marine and Heavy Engineering Holdings Bhd’s (MMHE) net loss widened to RM397.02 million in its second quarter ended June 2020 (2Q), from a net loss of RM9.48 million last year due to an impairment loss amounting to RM300 million.
The impairment loss was contributed by the collapse in demand for oil and energy during the pandemic, resulting in the deferring of upstream projects and cutback in capital expenditure by most oil and gas (O&G) companies, MMHE said.
“The impairment is deemed necessary in anticipation of a prolonged recovery in the industry resulting from these exceptional events,” it said in a filing to Bursa Malaysia yesterday.
MMHE’s revenue for the quarter also recorded a decline of 43.8% to RM155.31 million from RM276.45 million last year, mainly due to lower contribution from both segments.
The group loss per share for its 2Q stood at 24.8 sen against 0.6 sen a year ago.
On its operations, MMHE recorded an operating loss of RM100.2 million compared to RM8.6 million losses in 2Q last year, mainly due to lower revenue, additional cost provision and higher unabsorbed overheads from the Covid-19 impact of RM90 million during the quarter.
For its heavy engineering segment, MMHE’s operating revenue declined 26.2% to RM112.1 million from RM151.9 million, mainly due to lower revenue from ongoing projects as progress was affected by the yard shutdown during the Movement Control Order.
It added that due to the additional cost and lower revenue, the segment posted an operating loss of RM69.8 million during the quarter compared to an operating loss of RM19.8 million last year.
Its marine segment also saw a drop in operating revenue of 65.25% to RM43.3 million against RM124.6 million last year due to a lower number of secured vessels as the segment was badly impacted by the yard shutdown, coupled with the pandemic global lockdown measures.
The segment reported an operating loss of RM30 million from an operating profit of RM8.6 million last year.
On the prospect of the O&G market, MMHE said it expects the revival in the oil market to be slow and gradual with the oil demand not expected to reach the prepandemic levels for the future.
“The group sees that the oil price has rebounded modestly on further OPEC+ production cuts and resumption of economic activity from the easing of worldwide Covid-19 pandemic lockdowns,” it said.
The group added that while it has resumed its yard operations from April 2020, MMHE’s activities are still constrained to the “new normal” with restrictions imposed to ensure that the Covid-19 pandemic is kept under control.
MMHE’s share price closed 3.8% or 1.5 sen lower yesterday to 38 sen, dragging its market capitalisation to RM608 million.