This article first appeared in The Edge Financial Daily on October 26, 2018

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) reported a net loss of RM22.72 million, or a loss per share of 1.42 sen, in its third quarter ended Sept 30 on additional cost provisions, against a net profit of RM16.41 million, or earnings per share of 1.03 sen, a year ago.

Apart from the cost provisions for its ongoing heavy engineering projects, MMHE attributed the losses to compressed margins for its dry docking activities, as well as additional costs on marine conversion works where it said revenue recognition is still pending verification and approval by clients.

This was despite registering a 34.6% increase in revenue to RM289.80 million compared with RM215.35 million in the same quarter last year, contributed by an ongoing heavy engineering project as well as from conversion works and dry docking activities.

In the red for three consecutive quarters now, its cumulative nine-month net loss widened to RM97.47 million, from RM13.90 million in the same period last year.

Revenue for the period was a marginal 1% lower to RM701.12 million.

In an exchange filing, MMHE said it expects improvement in offshore spending by oil majors, and for oil prices to hover between US$70 (RM291.87) and US$80 per barrel.

It does not anticipate significant contribution from its heavy engineering segment for the remaining of the year, but guided that there could be a pickup in marine repair activities in the coming year as companies have until January 2020 to comply with the International Maritime Organisation’s fuel sulphur cap ruling.

“Whilst the group is optimistic about maintaining the current level of marine repair activities for the final quarter of this year, the marine segment performance has been affected by deferment of dry dockings by clients in the first half of this year as well as protracted claim discussions with marine conversion clients.

“As the industry outlook continues to be challenging in the current financial year, the group remains cautious and will focus on replenishing its order book in various geographical areas. Efforts to ensure competitiveness of ongoing and future bids are progressing and remain a priority.”