Marine & General foresees challenging year ahead

by ASILA JALIL / Pic credit: 

MARINE & General Bhd expects 2021 to be a challenging year in line with the challenging outlook for the oil and gas (O&G) industry as demand for oil continues to remain suppressed due to the pandemic.

The group’s upstream marine logistics division charters out offshore support vessels to be used by oil majors, while its downstream marine logistics division charters out liquid bulk carriers mainly to the petrochemical and oleochemical industries.

“Operationally, the declining demand for oil is expected to persist until the second half of 2021 or until there is a sufficient widespread use of the Covid-19 vaccine, as international borders remain subjected to severe restrictions and the global economy is still on a weak footing.

“This is further exacerbated by the uncertain outlook for compliance of OPEC+ towards the oil production cut agreement and the continuing demand for clean energy,” the group said in its bourse filing yesterday.

The group recorded a net profit of RM56.07 million in its second quarter ended Oct 31, 2020, against a net loss of RM12.15 million a year ago mainly due to restructuring gain and lower finance costs.

For the quarter under review, the group completed a debt restructuring scheme for its upstream division involving RM925 million borrowings. It recognised a restructuring gain of RM106.8 million.

It also registered a RM23.8 million loss from operation attributable to the initial deployment of two tankers which contributed to higher depreciation and crewing expenses, with lower revenue exacerbating loss.

The company’s revenue decreased 13.3% year-on-year during the quarter under review to RM47.57 million from RM54.84 million a year ago in line with the lower charter activities by both upstream and downstream divisions where fleet utilisation declined to 63% and 44% respectively due to the negative impact of the Covid-19 pandemic to the O&G industry.

For the cumulative six-month period, the group recorded a net profit of RM41.08 million versus a net loss of RM20.58 million last year. Turnover for the period was down by 5.08% to RM102.85 million against RM108.35 million over the same period last year.

For its upstream division outlook, the group expects lower vessel utilisation. However, it will be mitigated as a big portion of the fleet is on long-term integrated logistics control tower charter contracts.

It added that the gradual reopening of businesses in the country along with other key trading partners such as China, Japan and Singapore, as well as recent developments on the Covid-19 vaccine offer hope of recovery next year.

Marine & General share ended flat yesterday at 7.5 sen, valuing the company at RM54.29 million.