MISC 2Q earnings fall 42%; group pays seven sen dividend

This article first appeared in The Edge Financial Daily, on August 8, 2018.
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KUALA LUMPUR: MISC Bhd, which is 62.67% owned by Petroliam Nasional Bhd, saw its net profit fall 42.3% to RM321.2 million in the second quarter ended June 30, 2018 (2QFY18) from RM556.5 million a year ago, on lower contributions across all business segments.

Earnings per share also fell to 7.2 sen for 2QFY18 from 12.5 sen for 2QFY17. Quarterly revenue also came in 7% lower at RM2.14 billion from RM2.3 billion a year ago.

Nevertheless, the group declared a second interim dividend of seven sen per share for the financial year ending Dec 31, 2018 (FY18), payable on Sept 14.

The weaker quarterly performance dragged down the group’s net profit for the cumulative six months (1HFY18) to RM631.8 million, down 48.7% from RM1.23 billion a year ago, while revenue dropped 21.3% to RM4.16 billion from RM5.29 billion in 1HFY17.

On current year prospects, MISC said in June Opec and other top crude producers had agreed to raise output from July by about one million barrels per day, although the actual oil supply coming online is likely to be lower due to persisting geopolitical challenges in some oil producing countries. As such, Opec-led production cuts would begin to ease over the second half of 2018.

“This development is expected to be positive for tanker markets as demand for crude tankers is likely to pick up and the very large crude carrier segment is expected to benefit the most, especially for Arabian Gulf-Asia trade.

“Tanker demolition rates have remained high, but tanker earnings are still being hit as fleet growth continues to exert pressure on petroleum freight rates. Nevertheless, rising global oil consumption, higher US exports and eroding inventories are expected to support the recovery in freight rates in the medium to longer term,” he added.

In the liquefied natural gas (LNG) shipping segment, current spot rates are rising gradually on the back of improved chartering activities, said MISC.

“International LNG trade has continued to thrive from both  supply and demand perspectives mainly driven by demand growth from strong enforcement of China’s coal-to-gas switching policies and expected new and/or ramping of LNG supplies from the Atlantic during the second half of 2018.

“Despite the tonnage oversupply situation in the spot market, indicators are positive for further improvements through the rest of the year. Nevertheless, our present portfolio of long-term charters will provide stable income and cash flows to the group’s LNG business segment,” said MISC.

The group also believes that the steady oil price recovery in recent months and renewed interest in growth opportunities have led to an increase in activities in the offshore segment, especially for developments within the Atlantic Basin.

“Such optimism is expected to boost the number of projects approved, which represents opportunities for the group. Our existing portfolio of long-term contracts will also continue to support the stable financial performance of the offshore business segment,” it said.