This article first appeared in The Edge Financial Daily, on June 16, 2016.

KUALA LUMPUR: Integrated oil and gas (O&G) player Daya Materials Bhd is looking to leverage on its strength in construction to bid for power and infrastructure projects as it looks for a way out from the gloom cast by depressed O&G prices in its offshore segment, which, in the words of its group chief executive, is “killing” the group.

“As the O&G industry has gone down tremendously in the past few years, we are exploring other areas. In particular, we are also looking into some energy projects in Indonesia. We prefer to look into long-term concession projects that will generate recurring income. We are also looking into some infrastructure projects.

“We are trying to reposition ourselves because offshore is killing us. We cannot lie to ourselves that this will rebound and we make it back. It will take a while. At the same time, with the resources that we have, we can put some efforts into other areas,” said Datuk Lim Thean Shiang, group chief executive officer of Daya Materials.

The group has been in the red for two years after recording a net loss of RM32.3 million in the financial year ended Dec 31, 2014 (FY14), followed by a narrower loss of RM18.6 million in FY15, as the O&G sector was hammered by plunging oil prices.

Its gross profit margin was halved to 7% in FY14 from a year ago, before shrinking further to about 2% last year. In the first quarter ended March 31, 2016 (1QFY16), it recorded a net loss of RM29.2 million, with the O&G segment alone incurring RM25.6 million in losses.

“If you look at the power or infrastructure projects, you’ll notice that a lot of them are construction-related in the first place. By leveraging on our strength in construction, we [can] get into some of these projects and it makes a lot of sense for us,” said Daya Materials executive vice-chairman Nathan Tham.

“Our intention is to look for recurring income. With the mix of these long-term and short-term projects, we hope the group will be able to perform consistently for our shareholders,” Tham added.

In the meantime, the group will focus on streamlining its offshore operations, said Lim. The termination of the charter agreement for the Siem Daya 2 (SD2) vessel is one such streamlining effort, in view of continued uncertainties in the offshore sector.

The group said the termination will result in cost savings of about US$27 million (RM110.7 million) a year. It announced the termination of the SD2 charter from Siem Offshore Rederi AS last month. The charter contract, signed on Sept 3, 2013, was for five years, with an option to purchase.

As for its SD1 vessel, which is owned by the group itself, Daya Materials is looking to secure high-quality contracts for the long term and progress of its job bids is looking positive so far, according to both Lim and Tham.

Daya Materials currently has an overall gross order book of RM1.8 billion, with some projects to last up to seven years.

“With the projects we believe we can secure, and the cost savings from the termination of the SD2 charter; we believe the group will be able to perform in the second half of this year,” Lim added.

Daya Materials slipped 6.25% to close at 7.5 sen yesterday, with a market capitalisation of RM138.9 million. The current price is about half its book value.

The company also announced that its independent and non-executive chairman Tan Sri Dr Azmil Khalili Khalid, 55, had retired from his position, effective yesterday.