Malaysia Marine and Heavy Engineering eyes new business segments as company slips into 3Q net loss

Posted on 03 November 2021

Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) reported on Tuesday (Nov 2) a net loss of RM23.88 million for the third quarter ended Sept 30, 2021 (3QFY21) from a net profit of RM2.64 million a year earlier as the company’s heavy engineering and marine units registered operating losses amid factors including the Covid-19-driven movement restrictions to curb the spread of the pandemic.

MHB’s heavy engineering unit constructs oil and gas structures, while the marine segment offers ship-repair services.

"The group aims to replenish its order book through diversifying into new segments and new regions. Furthermore, ongoing efforts focusing on cost management, safe execution and timely delivery of ongoing projects remain key priorities,” the company said in a filing with Bursa Malaysia.

MHB, however, did not specify the new business segments and regions the company plans to diversify into.

For 3QFY21, MHB said group revenue rose to RM389.29 million from RM369.46 million the year before.

"The heavy engineering segment recorded a revenue of RM330.6 million for the current quarter, compared with RM270.9 million for the corresponding quarter [of the previous year], mainly due to increased activities for an ongoing project. The segment posted an operating loss of RM13.1 million for the current quarter against an operating profit of [about] RM200,000 for the [previous] corresponding quarter due to lower contributions from post-sail-away projects.

“[Marine segment] revenue of RM58.7 million was RM39.9 million lower compared with RM98.6 million for the [prior] corresponding quarter mainly due to absence of conversion works during the current quarter. In tandem with the lower revenue, the segment swung to an operating loss of RM9.1 million, compared to an operating profit of RM1.2 million for the corresponding quarter [of the year before],” MHB added.

For the cumulative nine months ended Sept 30, 2021 (9MFY21), the company said its net loss narrowed to RM162.61 million from a net loss of RM388.25 million a year ago, while revenue was higher at RM1.04 billion compared with RM871.21 million previously.

"[On a quarterly basis,] the group posted a higher revenue of RM389.3 million against the preceding quarter’s (2QFY21) revenue of RM302.4 million mainly due to higher revenue from the heavy engineering segment partially offset by lower revenue from the marine segment. 

"In tandem with the higher revenue, the group recorded a lower operating loss of RM20.2 million compared with the preceding quarter's operating loss of RM26.3 million,” said MHB, which did not declare dividends for 3QFY21.

Looking ahead, the group added that it remains cautious about prospects for the heavy engineering segment as high prices of steel and uncertainty over a new wave of global Covid-19 infections are expected to continue to result in modest spending by oil majors.

On the marine segment, MHB said that until international borders reopen, foreign clients are likely to continue sending their vessels to shipyards in countries with more relaxed border restrictions. 

In addition, liquified natural gas (LNG) demand from consumers in the Far East countries is expected to remain high during the upcoming winter despite the global gas price hike, hence increasing LNG trade, which will result in more LNG vessel owners deferring dry-docking, according to the company.

"This would in turn lead to greater competition among shipyards for the limited dry-docking opportunities. As such, the group expects the marine business to remain challenging,” MHB said.

MHB is a 66.5%-owned subsidiary of MISC Bhd, which in turn is a 51%-owned subsidiary of Petroliam Nasional Bhd (Petronas).

At 3.08pm on Tuesday, MHB’s share price had risen half a sen or 1.19% to 42.5 sen, giving the company a market value of RM680 million.

MHB has 1.6 billion issued shares, according to its latest quarterly financial report.

Source : The Edge