Vallianz posts 84.9% tumble in Q3 profit

SINGAPORE - Offshore support vessel provider Vallianz Holdings posted an 84.9 per cent fall in net profit for the third quarter to US$693,000 (S$980,600) from US$4.6 million in the year-ago period.

The bottomline was hurt by a 488.6 per cent rise to US$2.12 million in net profit to non-controlling interests, due mainly to the profit contribution by a subsidiary which is not wholly owned by the group.

There was also the impact of a 64.7 per cent fall to US$771,000 in share of profit of associate and joint ventures. Vallianz said it recorded a loss of US$121,000 from its share of results from associate and joint ventures in the nine month period to end-September. This was mainly due to a loss reported by PT Vallianz Offshore Maritim, its 49 per cent-owned associate in Indonesia.

Other income fell 51.3 per cent to US$709,000. Vallianz said this income consisted mainly of waiver of prior year charges by vendor.

Operating profit from ordinary activities slumped 49.5 per cent to US$3.2 million. Vallianz said it recorded a decrease in gross profit margin to 21.7 per cent in the third quarter from 28.1 per cent a year ago amid a backdrop of lower charter rates as a result of the challenging business conditions in the offshore marine industry.

For the three months to Sept 30, revenue fell 8.4 per cent to US$54.8 million. Charter revenue increased year on year in the third quarter but this was more than offset by a decrease in vessel management revenue due mainly to the completion of ship management projects in Latin America in late 2015.

As at end-September, total charter and brokerage services accounted for approximately 70 per cent of the group's revenue compared to 64 per cent a year ago. Vallianz said this is in line with the its strategy to focus more on the expansion of its vessel chartering and brokerage business, and less on vessel management services.

Said Vallianz CEO Ling Yong Wah: "Notwithstanding the difficult business environment, the group has consistently generated profits for three consecutive quarters this year.

"Although business conditions in the global offshore oil and gas industry are likely to remain depressed and competition in the Middle East has been increasing, there are still business opportunities for the group in this region due to continued spending on oil and gas production activities by national oil companies."

As at Sept 30 the group had an outstanding chartering services order book valued at approximately US$1 billion in aggregate, comprising primarily long term charters with options to extend up to 2025. These charter contracts are mainly with a national oil company in the Middle East, said Vallianz.

In its earnings statement, Vallianz said that given the challenging business environment, it will continue to adopt a cautious approach in the execution of its business plans. To remain competitive, the group will focus on operational and service excellence while optimising its cost structure.

Vallianz also said it will continue to closely monitor and evaluate the impact of developments relating to Swiber, an associate which is under judicial management.

The group has three outstanding bank loans which have corporate guarantees from Swiber. In addition, one of these bank loans requires Vallianz to continue to be an associate of Swiber as a loan covenant. Vallianz is already in discussions with the relevant banks to amend these terms.

Vallianz said that to date, the company and its three subsidiaries have not been served with any notices of any event of default for any of its loans and has successfully obtained waivers for event of default to be called for two of the three bank loans. The company remains in active discussion with the third bank, said Vallianz.