MISC 2Q net profit down 42.28% as earnings fall across all divisions

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KUALA LUMPUR (Aug 7): MISC Bhd saw its net profit for the second quarter ended June 30, 2018 (2QFY18) decline 42.28% year-on-year (y-o-y) to RM321.2 million from RM556.5 million on lower earnings across all its divisions.

The largest decline in operating profit was recorded in the group's liquefied natural gas (LNG) division, which included recognition of compensation for the early termination of a time charter contract, coupled with lower revenue in the current quarter, MISC said in a stock exchange filing today.

Quarterly revenue was down 6.98% to RM2.14 billion from RM2.3 billion a year ago as contribution fell from its LNG, petroleum, offshore and heavy engineering divisions.

A lower number of operating vessels and a lower charter rate dampened revenue from the LNG division, while a stronger ringgit dragged down revenue in the petroleum division. The petroleum division had also recorded higher bunker and vessel depreciation costs in 2QFY18.

In the offshore segment, revenue and operating profit were lower as the previous quarter had included reimbursable revenue from demobilisation of mobile offshore production units.

The heavy engineering division meanwhile saw new secured projects as still being in their early stages, with lower revenue also caused by conversion works and fewer dry-docking repairs in its marine sub-segment.

The division also incurred higher costs in the quarter, MISC said.

For the six months ended June 30, 2018 (1HFY18), the group's net profit declined 48.75% to RM631.8 million from RM1.23 billion for the same period last year, while revenue decreased 21.27% y-o-y to RM4.16 billion from RM5.29 billion a year ago.

MISC also announced a second tax exempt interim dividend of 7 sen per ordinary share, payable on Aug 21. This is lower than the 12.5 sen dividend announced in 2QFY17.

Going forward, the group said the agreement by OPEC and other top crude producers to increase output by about 1 million barrels per day from July is likely to be positive for tanker markets.

"In the LNG shipping segment, current spot rates are rising gradually on the back of improved chartering activities. Despite the tonnage oversupply situation in the spot market, indicators are positive for further improvements through the rest of the year," MISC said.

The recent steady oil price recovery and renewed interest in growth opportunities, leading to more activity in the offshore segment, is expected to boost the number of projects approved, which will also present opportunities for the group, it said.

However, these have yet to trickle down to real opportunities for the heavy engineering segment, MISC added. "As such, the heavy engineering segment performance is expected to remain under pressure in 2018," it said.

Shares in MISC were up 6 sen or 0.92% at RM6.58 ahead of the noon break today.