This article first appeared in The Edge Financial Daily on January 31, 2019

BUKIT JALIL: Alam Maritim Resources Bhd, which has been loss-making for three years, does not see the likelihood of turning around this year, no thanks to the continued asset impairments.

Furthermore, its managing director Datuk Azmi Ahmad noted that the latest contracts secured will start contributing only next year.

“The 2019 financial year (FY19) will not be the year we turn around our operations. We are still in repayment mode and there are still a lot of factors affecting the company. One of them is the continued impairment of vessels.

“We have been impairing our vessels for a couple of years already. We have not approved any impairment rate yet for FY18. We expect FY19 to be similar and our performance will be affected by this,” Azmi told the media after the group’s extraordinary general meeting (EGM) yesterday.

For the first nine months of 2018, its net loss widened to RM42.23 million from RM20.27 million. Accumulative revenue dropped 47% to RM61.75 million from RM116.7 million.

The dismay performance was attributed to lower revenue contribution from the subsea and offshore installation and construction (OIC) segment as well as the offshore support vessel (OSV) segment.

The company’s share price tumbled to a low 6.5 sen in late December last year, falling from 40 sen in early 2016 and the peak of RM1.65 in April 2014. It closed at 9.5 sen yesterday.

On the positive note, Alam Maritim has bagged several contracts since late 2018 and vessel utilisation rate is expected to be higher at 55% this year. However, Azmi said these factors will not contribute to Alam Maritim’s earnings any time soon.

“The full impact of the contracts will only be reflected in FY20,” he added.

Alam Maritim’s shareholders approved all resolutions, including the proposed issuance of redeemable convertible notes to raise up to RM160 million, at the EGM.

The group has allocated RM50 million of the fresh capital raised for maintenance and inspection of its existing vessels and RM80 million will be used to convert two of its diesel-powered offshore support vessels (OSVs) to liquefied natural gas-powered OSVs, as well as to acquire new vessels.

This forms part of the group’s plans to turn around its operations, Azmi said, as the upgrading and acquiring of vessels is expected to put Alam Maritim in a good position to capitalise on the expected increase in activity by Petroliam Nasional Bhd.

Meanwhile, the group continues to optimise its fleet of vessels. Currently, it has 39 vessels and is looking to reduce the number to about 25. It is focusing more on specialised vessels going forward, which offers better returns.

Alam Maritim is required to sell eight vessels this year under the debt restructuring exercise that the group undertook with the Corporate Debt Restructuring Committee of Bank Negara Malaysia. To date, three vessels have been sold.

“We are reducing the number of vessels and are focusing on certain vessels like PSVs (platform support vessels) and AHTS (anchor handling tug supply) vessels, for example.

“We believe the OSV market is saturated and perhaps it is time for us to move away — but not totally — and put more focus on the subsea services and OIC segment,” Azmi explained.

This shift in focus is already reflected in the group’s order book, he pointed out, as about RM500 million of its RM753 million worth of jobs comprise subsea services contracts, while the OSV segment’s tender book make up about RM250 million of total works secured by the group.

He said the group’s order book will keep it occupied for the next three to five years.

In the meantime, Alam Maritim is tendering for RM1.3 billion worth of works and is also looking to secure more foreign contracts. The group aims to grow its order book to RM1 billion by year end.