Nam Cheong Q4 net profit falls 42% on higher expenses and lower tax credit

SINGAPORE - Mainboard-listed Nam Cheong announced on Thursday a 42 per cent year-on-year fall in net profit to RM41.1 million (S$15.5 million) for the fourth quarter ended Dec 31, 2014, as higher overall selling and administrative expenses and a lower income tax credit outweighed revenue growth.

Revenue at the Malaysian-based offshore support vesses builder rose 29 per cent to RM523.9 million, largely due to the progressive recognition of revenue derived from the platform supply vessels (PSVs) sold in the quarter that contributed 40 per cent of the total shipbuilding revenue for the quarter.

While gross profit margin was maintained at the range of 15-20 per cent, the gross profit margin for the shipbuilding segment fell to 15 per cent from 21 per cent a year ago mainly due to higher contribution from build-to-order vessels that have lower margins.

Selling and administrative expenses rose by RM28.3 million, manily from net fair value loss on derivatives, and there income tax credit fell to RM4.2 million compared to RM12.4 million a year ago.

For the full year, Nam Cheong enjoyed a 47 per cent rise in net profit to RM302.2 million on a 53 per cent huke in gross revenue to RM1.9 billion.

The board has recommended a first and final dividend of 1.5 cents per share, amounting to total dividends payable of $31.4 million.

On the outlook for the company, Nam Cheong's group CEO Leong Seng Keat said: "Despite the recent fluctuations in oil prices, we believe we are well equipped with the institutional knowledge and experience to successfully weather through the cycle.

"In addition, Nam Cheong's business presence globally has also become more diverse as we continue to secure repeat orders from customers worldwide, mitigating geographical concentration risks.

"Nam Cheong's strategy remains focused on the shallow water segment and we expect to benefit from an increase in cumulative planned offshore infrastructure developments in the segment over the next few years. This is largely due to more oil fields coming on-stream than those being decommissioned. Further, we also anticipate greater demand for our vessels, particularly from shallow water geographical regions as a result of the expected global delivery of more than 100 modern jack-up rigs between 2015 and 2017."