MISC expects weak demand to persist

The group is expecting new challenges to arise in the months ahead

by NUR HAZIQAH A MALEK / source: misc.com.my

MISC Bhd expects the prolonged weak oil demand to impact its offshore service business for the remainder of the year, as its third-quarter (3Q) profit continued to take hits from the lower number of vessels in operation.

In a Bursa Malaysia filing yesterday, the company reported a near 3% year-on-year (YoY) decline in net profit for its 3Q ended Sept 30, 2020 (3Q20), to RM258.3 million from RM266.1 million the previous year on overall lower revenue contribution.

Its revenue for the quarter fell 4.2% YoY to RM2.06 billion attributed partly to lower turnovers from the group’s liquefied natural gas (LNG), petroleum and offshore segments.

MISC president and group CEO Yee Yang Chien in a statement stated that the group is expecting new challenges to arise in the months ahead as the global economic rebound is at risk from rising coronavirus cases.

“As the health and wellbeing of our global workforce at sea and shore remain as our top priority, we will hold strong to our strict safety protocols with no compromise at all across the geographies that we operate in,” he said.

Moving forward, the company intends to remain focused on the strengthening of its portfolio of longterm contracts in its core businesses.

“Nevertheless, we will remain focused on strengthening our portfolio of long-term contracts in our core businesses and continue our pursuit for markets, which are integral to the build-up of our sustainable income,” he said.

In the LNG shipping market, the slower pace of supply growth and weather-related outages have tightened supply and is expected to provide further support to the spot charter rates in 4Q20.

In contrast, the crude tanker market continues to be affected by weak tonnage demand and increased vessel availability.

Its offshore business will also continue to source for attractive opportunities in targeted markets and concentrate on the new floating production storage and off-loading (FPSO) project in Brazil as uncertainties shroud the heavy engineering segment.

Yee added that in the last few months, the company had secured a series of long-term charters for its ethane carriers with a new alliance in China.

“We performed consistently well into the 3Q with a new portfolio in hand when we made a successful entry into the global ethane market and added on six very large ethane carriers to our existing fleet.

He said the group made a landmark breakthrough with its foray into Brazil.

“Backed by strong tailwinds, we made a landmark breakthrough in the same quarter with our maiden foray into Brazil’s deepwater oil and gas (O&G) sector with the award of the Mero-3 project in one of the main hotspots for FPSO in the world.

“This major milestone demonstrates our capacity and capability in undertaking complex FPSO projects, laying a solid foundation for opportunities to secure more international projects in the future,” he said.

On a year-to-date (YTD) basis, the group recorded a net loss of RM599 million versus a net profit of RM1.18 billion recorded previously, due to provisions and impairment losses registered in 1Q20 relating to the decision on arbitration proceedings by Gumusut-Kakap Semi-Floating Production System (L) Ltd against Sabah Shell Petroleum Co Ltd.

The group also recorded an impairment loss on its heavy engineering’s assets in the preceding quarter in light of the current O&G downturn, Covid-19 pandemic and the expected prolonged recovery of the industry.

Revenue for the YTD period, however, was higher at RM6.76 billion versus the previous RM6.59 billion, while its cashflow generated from operating activities for the period was higher than previously as well.

The company’s share price ended 2.5% or 19 sen lower yesterday at RM7.41, after having opened at a one-month high of RM7.88.