BHIC's 3Q net profit falls 62% on lower revenue

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KUALA LUMPUR (Nov 9): Boustead Heavy Industries Corp Bhd's (BHIC) net profit shrank 62.1% to RM3.94 million or 1.59 sen per share for the third quarter ended Sept 30, 2015 (3QFY15) from RM10.39 million or RM4.18 per share a year ago, on lower revenue generated in the oil and gas (O&G) Belum Topside project, and defence-related maintenance, repair and operations (MRO) activities for the current quarter.

Revenue for 3QFY15 fell 21% to RM64.92 million from RM82.14 million 3QFY14.

The weak third-quarter earnings dragged down BHIC's net profit for the nine-month period (9MFY15), which dropped 3.6% to RM21.52 million or 8.66 sen per share from RM22.33 million or 8.99 sen a share a year ago.

In a filing with Bursa Malaysia today, BHIC attributed the lower earnings to lower contribution from its defence-related MRO activities and higher operating costs largely due to unfavourable foreign exchange (forex) rate translations for the rollover of the group's foreign currency-denominated borrowings for the period.

"The chartering segment's performance was dampened by unrealised forex losses resulting from the group's foreign currency-denominated borrowings to purchase the Chulan tankers in prior years," it said.

"The associate company Boustead Naval Shipyard Sdn Bhd's results were also affected in the period due to a provision for foreseeable loss made for the restoration of KD Perantau following the incident in November last year," it added.

Revenue for 9MFY15 also fell 4.4% to RM203.47 million from RM212.81 million in 9MFY14.

BHIC executive deputy chairman and managing director Tan Sri Ahmad Ramli Mohd Nor said it has been a challenging period for the group as its earnings were affected by unfavourable forex rate fluctuations, apart from the prudent provisions made by the associate.

"Moving forward, the group expects to finish the current financial year on a positive note, with heavy engineering continuing to be the strongest segment, boosted by the performance of current MRO projects.

"The group expects the O&G sector to remain challenging in view of the present competitive environment and capital expenditure cuts as announced by oil majors," he said in a statement today.

BHIC's counter was not traded today. With its previous close of RM2.29, the group's market capitalisation stands at RM569 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)