KUALA LUMPUR (Aug 27): Asia’s leading offshore support vessel (OSV) provider Bumi Armada Bhd slipped into a net loss of RM291.53 million for the second quarter ended June 30, 2015 (2QFY15) after it booked in a whopping impairment charge of RM383.7 million.

The quarterly loss is probably the largest ever for Bumi Armada. Its share price dived to a record low of 78.5 sen on Tuesday, with loss per share at 4.97 sen.

Quarterly revenue dipped 22.2% to RM459.08 million from RM590.08 million last year, primarily due to lower utilisation of vessels under the OSV and T&I (transportation and installation) business units, it added.

However, the group said that excluding the impairment charge, it would have posted an adjusted net profit of RM84.8 million, compared with RM98.38 million in the previous corresponding quarter.

“The impairment charge was made pursuant to MFRS 136 ‘impairment of assets’, and relates mainly to the write-down of the carrying value of certain vessels in the T&I and OSV business units and a non-core asset held at a joint venture, in light of the weak outlook for the oil and gas (O&G) sector.

“In addition, the charge includes a write-down of the group’s available-for-sale financial assets,” Bumi Armada said in the filing with Bursa Malaysia yesterday.

Bumi Armada executive director and acting chief executive director Chan Chee Beng commented that the group’s strong order book of RM25.8 billion, with potential extension options worth RM13.3 billion, will generate steady cash flows and earnings in the coming years.

For the six months ended June 30 (1HFY15), the group was in the red with a net loss of RM219.48 million against a net profit of RM163.16 million last year. Its cumulative revenue shed slightly by 2.62% to RM1.03 billion against RM1.06 billion a year ago.

The group also highlighted that it generated strong net cash flows from operating activities of RM383.1 million, a year-on-year (y-o-y) increase of 53%.

The group’s 1HFY15 earnings before interest, taxes, depreciation and amortisation (Ebitda) increased 14.6% y-o-y to RM556.5 million. The strong net operating cash flows and Ebitda increase were driven mainly by the floating production, storage and offloading (FPSO) unit.

Chan acknowledged that the low oil price continues to dampen sentiment and activities in the offshore O&G services sector, with the market likely to be challenging through 2016.

“We are actively monitoring the performance of all business units, and will focus on further improving the productivity and efficiency of the group, including additional cost reduction measures when necessary,” he added.

While the challenges and volatility in the OSV and T&I businesses will continue for some time, Chan noted that the FPSO business remains robust on the back of the group’s long-term contracts and the ongoing conversions.

“Our new FPSO vessels will start to come on stream in 2016 and are expected to deliver the next round of strong growth for the group,” he said.

This article first appeared in digitaledge Daily, on August 28, 2015.