This article first appeared in The Edge Financial Daily on February 19, 2020

KUALA LUMPUR: Impairments widened Wah Seong Corp Bhd’s net loss to RM30.59 million for its fourth quarter ended Dec 31, 2019 (4QFY19), from RM9.98 million in the previous corresponding period.

Quarterly revenue contracted nearly 40% to RM429.25 million, from RM706.37 million for 4QFY18, the group’s exchange filing yesterday showed.

Excluding all impairment losses of RM63.2 million, the group would have posted a net profit of RM35.6 million for 4QFY19, Wah Seong noted.

Nevertheless, the oil and gas (O&G) pipemaker declared a first interim dividend of one sen per share, payable on April 8.

The interim dividend comprises 0.4 sen in cash dividend and a special single-tier dividend on the basis of one to 20, at an equivalent value of gross share dividend of 0.6 sen per share, given its Dec 31 closing price of RM1.20.

In its filing with Bursa Malaysia, Wah Seong said the O&G segment recorded a loss before tax of RM57.7 million, compared to a profit of RM13.3 million in the corresponding quarter a year ago, due to the recognition of RM34.7 million in impairment losses on leasehold buildings and plant and machinery that were idle due to the lack of O&G projects.

There was also a share of impairment losses on vessels from a joint venture of RM18 million.

“The above impairments, together with the reduction in revenue due to completion of a major project that has been ongoing since late 2016, contributed to the decrease,” it added.

Losses were also recorded at its industrial trading and services segment, due to impairment loss on receivables at its building materials business, despite better results from the high-density polyethylene pipe business.

For its renewable energy (RE) segment, profit before tax fell 34% to RM4.8 million, impacted by losses in its boiler business.

Wah Seong’s 4Q losses dragged its full-year net profit down to RM24.14 million, dropping 62.8% compared with RM64.8 million in the preceding year. Annual revenue stood at RM2.51 billion, lower by 15.1% compared with RM2.96 billion for FY18.

The group said it is tendering for a number of jobs globally, which are anticipated to be awarded over the coming months.

It said it is confident of securing some of these jobs, which will have a positive contribution to the group for FY20.

Currently, the group’s order book of RM929.6 million comprises RM576.7 million in the O&G segment, RM309.3 million in the RE segment, and RM43.6 million in its industrial trading and services segment.

Shares in Wah Seong closed six sen or 4.32% lower at RM1.33 yesterday. The stock has risen 10% since end-2019, valuing the group at RM1.03 billion.