Heavy engineering and LNG shipping dent MISC earnings

Heavy engineering and LNG shipping dent MISC earnings
Energy shipping firm turns in lower net profit of RM530mil for Q4

PETALING JAYA:MISC Bhd’s net profit for the fourth quarter ended Dec 31 declined to RM529.8mil from RM752.7mil a year ago mainly due to lower revenue contributions from its heavy engineering and liquefied natural gas (LNG) shipping segments.

The group announced second interim (tax exempt) dividend of 20 sen per share for the financial year to be paid on March 16.

The quarter’s revenue of RM2.52bil was 24% lower than last year corresponding quarter’s revenue of RM3.31bil

Heavy engineering’s lower revenue was due to fewer and lower backlog and order intake in its heavy engineering sub-segment.

For the full year, MISC net profit was higher at RM2.58bil compared to RM2.47bil in 2015, despite lower revenue of RM9.6bil.

The increase in profit was mainly due to the recognition of gains on acquisition of subsidiaries and disposal of a subsidiary in the financial year.

“The year 2016 saw the global shipping industry undergoing another volatile year where businesses across the oil and gas supply chain suffered under very difficult market conditions. “Despite the prevailing challenges in 2016, MISC once again proved its resilience by turning in commendable financial and operational performances.

“We expect no less than another challenging year ahead.

However, we still see growth opportunities and we believe we have the resources to pursue these possibilities. Our priorities remain unchanged and the future growth of MISC will be guided by MISC 2020: our five-year business strategy towards attaining a sustainable level of secured profits by 2020,” said president and group chief executive officer Yee Yang Chien in a statement yesterday.

For this year, MISC foresees the petroleum shipping segment’s performance will come under pressure, with high fleet growth and potentially lower tonne mile demand as a result of reduced OPEC oil production post January 2017’s quota restriction.

On the LNG front, global LNG supply is expected to increase by 14% with the completion of new liquefaction plants this year. Despite the increase in gas supply, demand for LNG shipping is expected to remain sluggish as the tonnage oversupply situation will continue to persist as a result of higher vessel deliveries and lower project absorption.

This however will not impact the steady performance of the group’s LNG business segment as most of the vessels are employed under long-term charters.

The heavy engineering segment will continue with its effort on cost management and resource optimization to reduce its operating cost in line with the outlook of the industry. In addition, the group intensifies its effort to replenish its orderbook, namely from onshore segment, hook-up and commissioning and facilities improvement.

“Our conservative success in 2016 was the result of recognising the fact that global energy volatility would linger for yet a while and taking the necessary steps to reshape and future-proof our business.

“To this end, our key business segments took measures to strengthen their positions and their offerings to customers, as well as to protect themselves from the vagaries of the market,” said Yee.


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