Kim Heng back in the black after 7 years, thanks to rising offshore and marine activity

SINGAPORE - After struggling for almost a decade in what some in the industry call a “once-in-a-generation” depression, offshore and marine engineering company Kim Heng has finally bounced back into the black, due to astute planning and vessel acquisitions in recent years.

The Singapore listed company on Wednesday reported second-half net attributable earnings of $2.3 million for the year ended Dec 31, 2022, rebounding from

a six-month loss of $2.25 million a year earlier.

For the full year to end-December, Kim Heng posted a net attributable profit of $7.4 million, reversing a $5.9 million loss in financial year 2021.

The results came on the back of a 44 per cent rise in revenue in the second half – from July to December – to $49.37 million, which boosted full-year revenue some 26 per cent year on year to $79.84 million.

Notably, gross margins for the second half expanded to 40 per cent, from 27 per cent a year earlier. For the full year, margins expanded to 35 per cent, from 25 per cent in 2021.

Kim Heng’s balance sheet was also stronger as at end-December 2022, with cash and equivalents at some $13.1 million. Overall cash generated from operating activities after changes to working capital and income tax paid amounted to $18.9 million.

The company plans to pay a dividend of 0.2835 cent for the period. 

The company, which listed in January 2014 just before a decade-long energy market slump, attributed its strong results to robust demand recovery for its marine and offshore services, and the fact that it has the right vessels and service offerings as the energy market rebounds. 

Executive chairman and CEO Thomas Tan said Kim Heng’s prudent acquisition of vessels during the past three years, when many of its peers were in financial trouble amid the pandemic, was now paying off.

“Our acquisition of offshore vessels from 2017 to 2022 was done at huge discounts, and these are now helping us generate profit as activity picks up, creating a shortage of supply vessels resulting from no new investments in recent years,” he said.

Armed with over $45 million in funds from its 2014 initial public offering, Kim Heng picked up fleets of offshore heavy lifting cranes, anchor handling tug supply (AHTS) vessels, offshore support vessels (OSVs) and other assets at a fraction of their market value.

In 2017, it scooped up three AHTS vessels, each valued at $33 million, from troubled offshore services provider Swiber for just US$3.2 million. Between 2018 and 2020, it picked up about half a dozen more AHTS vessels and OSVs from other companies in the industry, such as Swissco, Posh Terasea and Pacific Richfield, at about 10 per cent of their previous market prices.

Many of these vessels have been repurposed over the past two years in preparation for the changing offshore energy exploration landscape, which included increasing demand for offshore renewable energy such as wind farms. The company pivoted to the offshore wind-farm market in 2019.

Kim Heng currently has significant wind farm engineering and support projects off the coast of Taiwan and Vietnam involving deployment of cable laying vessels, fabrications, installations of oil and gas, and chartering. It also has various energy projects as far away as the United States. 

Given the shortage of vessels and the demand for offshore energy exploration, especially in the renewables segment, Mr Tan is upbeat on the prospects going forward.

“Chances are 2023 will be an even stronger year for us,” he said. “The growing trend for offshore renewables is spurring increased exploration and development activities and fuelling demand for our vessels and services. We foresee renewables possibly accounting for 50 per cent of our bottom line by the end of next year.”

He added that the company had been able to expand in markets like Taiwan and Vietnam because of its strong relationships with global marine construction majors like Jan De Nul, Dredging International and Deme Construction.

Kim Heng closed unchanged at 9.4 cents on Friday.