MHB posts second consecutive profitable quarter, but warns of impairment risks ahead

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KUALA LUMPUR (April 29): A profitable heavy engineering segment helped Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) post a net profit of RM6.13 million for the first quarter ended March 31, 2020 (1QFY20), from a loss of RM29.37 million last year.

However, even as it posted its second consecutive profitable quarter, the oil and gas services company warned of significant risks ahead in the form of potential impairment of assets on the back of oil market uncertainties and the Covid-19 outbreak.

Quarterly earnings per share stood at 0.4 sen, as opposed to 1.8 sen of losses per share for 1QYFY19, according to its filing with Bursa Malaysia today.

The heavy engineering segment reported an operating profit of RM1.2 million for the quarter, compared to an operating loss of RM23.9 million for the corresponding quarter a year ago, mainly due to reversal of cost provisions.

Meanwhile, its marine division, profitable over the past year, dipped into the red with operating losses of RM1.45 million despite a revenue of RM119.65 million.

Revenue for the quarter rose by 70.57% to RM346.44 million from RM203.11 million for 1QFY19.

This came as heavy engineering segment revenue rose 80.8% to RM226.79 million from RM125.43 million, while marine segment revenue rose 54% to RM119.65 million from RM77.68 million. 

On prospects, MHB expects risks of deferments and scale-down of upstream projects to prolong and continue to pose challenges to the industry for the remainder of the year. 

It pointed out that the outlook for marine repairs and dry-docking activities remains uncertain on the back of charter rate volatility as well as a slowdown in liquefied natural gas demand.

“In light of the risks, the group remains cautious about the remaining opportunities despite Petronas' (Petroliam Nasional Bhd) announcement of its intention to maintain domestic capital spending plans,” it said.

The group also said it “faces significant risks to its financial results and position, including potential impairment of assets”.

“However, at the present time, the group is unable to fully assess and quantify the impact as discussions are still ongoing with clients and key stakeholders on the way forward. 

“Furthermore, the group's ability to assess the impact is made more difficult by the extremely fluid global situation riddled with uncertainties,” it said.

At noon market break today, MHB's share price had risen one sen or 2.47% to 41.5 sen, giving it a market capitalisation of RM664 million.