KUALA LUMPUR (May 27): Deleum Bhd doubled its net profit for the first quarter ended March 31, 2019 to RM2.81 million from RM1.4 million a year ago.

Its earnings per share also doubled to 0.7 sen from 0.35 sen in the previous year's corresponding quarter.

"The group's net profit increased by RM1.4 million as a result of higher tax expense incurred in the (previous) corresponding period, a share of higher results from an associate company and a favourable foreign exchange movement of the ringgit against the US dollar in the current period," the group said in a stock exchange filing today.

However, Deleum posted 69.4% lower net operating profit of RM1.52 million compared to RM4.64 million a year ago due to downward pressure on margins in all three business segments.

This was despite an increase in quarterly revenue by 17.5% to RM127.5 million from RM108.51 million, supported by higher contribution from its power and machinery segment, oil field services segment and integrated corrosion solution segment, all of which saw higher demand.

In the power and machinery segment, the group recorded an unfavourable change in sales mix, while the oilfield services segment had weaker margins earned from slickline activities. The integrated corrosion solution segment had to absorb higher operations cost to support the maintenance, construction and modification contract.

Deleum said it would remain cautious due to expected market volatility in the oil and gas segment throughout 2019.

The oil and gas environment remains challenging in 2019, and Petroleum Nasional Bhd (Petronas) is expected to continue striving for cost efficiency. Based on its Activity Outlook 2019-2021, greater market volatility is expected to persist in 2019.

Nevertheless, it was recently reported that for the upstream oil and gas segment, Petronas expects its capital expenditure to increase to above RM50 billion in 2019 from RM46.8 billion in previous year.

"The group will still remain cautious due to the market volatility and shall continue to enhance integration efforts across all core businesses by leveraging on its financial strengths and resources.

"The power and machinery segment will continue to provide after sales support and services to its existing installed turbines base customers and at the same time continues working with its business partners to provide additional products and services to its customers," Deleum said.

Meanwhile, the oilfield services segment is focusing on mobilising all its contracts to customers as well as practising stringent cost management to mitigate compressed margin pressures.

Shares in Deleum rose 0.5 sen today to close at RM1, giving the group a market value of RM401.55 million.