This article first appeared in The Edge Financial Daily, on May 19, 2016.
KUALA LUMPUR: EA Technique (M) Bhd foresees no challenges in its floating, storage and offloading (FSO) segment as most of its contracts serve the downstream segment and are on long-term charters, as opposed to spot charters, according to its managing director Datuk Abdul Hak Md Amin.
He said yesterday the company’s FSO contracts had not faced any early termination so far and are for the transporting of clean petroleum products like jet fuel and RON95 fuel, which see more stable demand than the upstream oil and gas (O&G) segment.
“Because our vessels are trading vessels, if an FSO [contract] is not renewed, we use it for trading. We are quite safe,” he told reporters when asked if its FSO contracts were facing any challenges, like early termination or suspension of contracts.
EA Technique’s order book stood at RM1.7 billion as at Jan 1, 2016. Of its sales, 63% comprise O&G engineering projects, while the remaining 37% are transportation-related contracts. Sixty per cent of its revenue is US dollar-denominated, while 30% of its costs are ringgit-denominated.
The bulk or 91% of EA Technique’s fleet of 35 vessels are on long-term charters. Only four vessels have contracts expiring in 2017 to 2018, while the rest have tenures stretching to December 2025. Its FSO vessels operate in Malaysian marginal oilfields.
Abdul Hak told The Edge Financial Daily in March the company’s earnings visibility was good and its vessel utilisation rate was at 90% to 95%.
“The only challenge for us [now] is requests from clients to revise our charter rates. Maybe we can extend the contract period, [or] we give [a] discount with the extended period. It will depend on negotiations [with clients],” he said yesterday, after the company’s annual general meeting.
He said the company hopes to surpass the stellar results it achieved in financial year 2015 (FY15).
“We will capture the full-year revenue of one FSO vessel at Tembikai, compared to last year, when we only captured half a year’s revenue. For our tugboats last year, we only captured seven months of revenue. This year, we will capture their full-year revenue.”
In the fourth quarter ended Dec 31, 2015, EA Technique’s net profit more than quadrupled to RM11.15 million from RM2.67 million a year ago, while revenue more than tripled to RM147.8 million from RM41.13 million previously.
The big leap in quarterly earnings propelled EA Techniques’s full-year net profit to RM37.34 million, more than double the RM14.23 million it saw in FY14.
The group has already secured new harbour tug contracts with Kertih Port Sdn Bhd (RM12.1 million), Sungai Udang Port Sdn Bhd (RM26.59 million) and Petronas Floating LNG 1 (RM150.5 million), which will add nine harbour tugboats deals and one mooring boat job in FY16.
The group has also secured a RM39 million charter contract for a chemical tanker, which is scheduled to commence by mid-2016.
Abdul Hak said the group hopes to increase its fleet by the end of this year, by adding another two tankers and 10 tugboats, though this depends on whether it secures more jobs.