KUALA LUMPUR: Bumi Armada Bhd expects the offshore support vessel (OSV) market to remain “subdued” this year, citing the current low oil price environment.
Bumi Armada’s OSV division registered a 62.5% slump in pre-tax profit to RM47.36 million for the financial year ended Dec 31, 2014 (FY14), from RM126.33 million for FY13, while its transport and installation (T&I) division recorded a 97% plunge in FY14 pre-tax profit to RM3.32 million from RM125.39 million for the previous year.
“The OSV division regularly reviews its cost structure and has recently implemented further cost reduction measures, including lowering the crewing rate, and in certain cases, stacking vessels which have been idle for a prolonged period,” Bumi Armada said in a written reply to questions by the Minority Shareholders Watchdog Group (MSWG) during its annual general meeting (AGM) yesterday.
Bumi Armada acting chief executive officer (CEO) and executive director Chan Chee Beng declined to meet reporters after the AGM, citing back-to-back meetings. The written reply, which was read to shareholders during the AGM, was obtained by reporters from a MSWG representative.
In the same statement, Bumi Armada explained that it is seeking to recover doubtful debts amounting to RM65.96 million, which are due from certain OSV and T&I customers who had faced “difficult financial circumstances” on the current industry conditions.
“We continue to actively pursue the collection of these receivables, and [we] have recovered approximately RM15 million in the first quarter of this year,” Bumi Armada said.
The RM15 million repayment leaves Bumi Amada with an outstanding doubtful debt of RM50.96 million.
In addition, Bumi Armada told the MSWG that it may recoup RM47.4 million after the commencement of its floating, production, storage and offloading (FPSO) vessel from 1QFY17, which is due from its Indonesian joint venture.
“[The amount] was used to fund the purchase of an Indonesian flagged vessel and the expenses related to the tender for the Husky Madura Project at the BD Field in the Madura Strait, offshore East Java, Indonesia,” Bumi Armada said in response to the MSWG’s question regarding its likelihood to recover the oustanding debt, which was unsecured, interest-free and with no credit term of 30 days.
Bumi Armada on Dec 10, 2014 announced that its wholly-owned unit Bumi Armada Offshore Holdings Ltd and its 49%-owned PT Armada Gema Nusantara had signed a 10-year charter contract with Husky-CNOOC Madura Ltd to provide FPSO services in Madura BD Field, Indonesia. The contract is worth US$1.18 billion, with the option of five annual extensions.
As for the group’s staff cost, which doubled to RM12.5 million for FY14 from RM5.9 million for FY13, Bumi Armada said: “The increase [was] primarily attributed to a payment to the ex-CEO upon his resignation.”
On Dec 5 last year, Bumi Armada announced that its CEO and executive director Hassan Assad Basma had requested for an early release of his contract of employment, which took effect on Jan 1 this year. A Dutch national, Hassan Assad, had served Bumi Armada (fundamental: 1.05; valuation: 0.8) since Sept 1, 2005.
According to its annual report for FY14, Bumi Armada’s total staff cost jumped 48.6% to RM726.74 million from RM489.04 million a year ago. The group also paid RM23.12 million to its board of directors for FY14, a 44.47% increase from RM16 million a year ago.
Currently, Bumi Armada’s total order book stands at RM38.9 billion, of which RM25.6 billion is on firm contract periods, and the remaining RM13.3 billion is on optional extensions. The group has operations in more than 18 countries, with 3,000 employees.
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This article first appeared in The Edge Financial Daily, on June 9, 2015.