Offshore, marine firms still buffeted by oil slump

Vessel builder Nam Cheong among sector's worst performers, with Q3 profit at $1,945

Offshore and marine players have continued to take a hit this quarter as the slump in oil prices shows little sign of letting up.

A slew of financial results for the sector this week, including two yesterday, underscored the problem.

Nam Cheong, Malaysia's largest offshore support vessel builder, is among the worst performers so far, with third-quarter earnings nearly wiped out to RM6,000 (S$1,945) - a stark contrast from the RM126.3 million a year earlier.

Revenue in the three months to Sept 30 plunged 69 per cent to RM189.3 million. Turnover from its shipbuilding segment also dived 69 per cent to RM182.1 million - only two vessels were completed and delivered during the quarter, compared with six before - while that from its vessel chartering business sank 70 per cent to RM7.1 million.

The group yesterday said it has deferred the deliveries of vessels which are under construction.

TOUGH CLIMATE

Given the tough conditions, companies that have managed to deliver profit are actually doing quite well.

RHB RESEARCH INSTITUTE ANALYST LEE YUE JER, on the performance of companies in the offshore and marine sector

OCBC Investment Research analyst Low Pei Han noted that Nam Cheong's results came in below expectations, which could spell "more downside ahead due to lacklustre earnings and a weak outlook that would affect vessel values".

She maintained a "sell" rating on the stock, which lost one cent, or 6.2 per cent, to 15.2 cents.

Offshore support vessel owner Vallianz Holdings also posted its third-quarter results yesterday, with net profit falling 4.7 per cent to US$4.6 million (S$6.5 million).

But revenue showed a rosier picture, jumping 52.4 per cent to US$59.8 million, lifted by higher contributions from its offshore support vessel chartering operations on a bigger fleet, as well as new revenue streams from subsidiaries acquired in the last quarter of 2014.

The stock closed 0.1 cent, or 2 per cent, up at 5.1 cents yesterday.

The prolonged downturn in the industry, with oil prices stuck at US$45 a barrel, down more than 60 per cent since June last year, has affected other firms, too.

On Thursday, offshore support solutions firm Pacific Radiance reported an 87 per cent dive in third-quarter net profit to US$1.7 million. Revenue slid 24 per cent to US$33.8 million, dragged down by lower utilisation of vessels from its subsea and support services businesses.

Ezion Holdings, which offers support oil and gas industry services, saw net profit fall 42.3 per cent to US$25.8 million, while revenue slid 9.1 per cent to US$86.2 million. The key reason was the absence of contribution from the marine and offshore logistic support services division.

Ezion,whose shares closed flat at 65.5 cents yesterday, has been cited by analysts as one of the more resilient stocks in the offshore sector, given its exposure to the more defensive lift-boat business.

RHB Research Institute analyst Lee Yue Jer noted: "Given the tough conditions, companies that have managed to deliver profit are actually doing quite well."

A version of this article appeared in the print edition of The Straits Times on November 14, 2015, with the headline 'Offshore, marine firms still buffeted by oil slump'. Print Edition | Subscribe