KUALA LUMPUR (March 18): Sapura Energy Bhd group chief executive officer Datuk Mohd Anuar Taib has warned that the group may have to make tough calls if it is unable to reach workable compromises with its customers after it entered into negotiations with them on legacy contracts for amicable solutions to recover or limit losses.
"We have had long discussions with clients on ways to moderate our losses, while ensuring project delivery. When a workable compromise is not possible, we may have to make difficult decisions," he said in a statement on Friday (March 18).
He cited the termination of its monopile installation contract at the Yunlin wind farm in Taiwan in its fourth quarter for the financial year 2022 (4QFY22) ended Jan 31, 2022, after "extensive negotiations" with its clients.
Anuar was commenting on Sapura Energy's latest financial results. On Friday, Sapura Energy posted a net loss to the tune of RM8.9 billion — its highest ever — for FY22 from a net loss of RM160.87 million in the prior financial year as it realised impairment on goodwill and property, plant and equipment worth RM5.39 billion collectively.
Annual revenue fell by 22.84% to RM4.13 billion from RM5.35 billion in FY21 due to lower contributions from its engineering and construction, and operation and maintenance segments.
Anuar said an uprecedented liquidity crunch and project losses due to the legacy contracts have brought the financially troubled Sapura Energy to face one of the most challenging years in the group's history.
He added that its current financial constraints are a culmination of many factors, including contracts accepted on onerous terms and operational issues exacerbated by the Covid-19 pandemic.
"These have resulted in significant losses in many projects, impacting our financial position.
"The group's liquidity challenges were also due to an unsustainable debt level and high overdue payables to our vendors, and these challenges became more acute with our working capital facilities suspended since October 2021," he said.
Sapura Energy said in a bid to address its unsustainable debt and settle outstanding claims to vendors, Sapura Energy has sought and received two orders by the High Court of Malaya to start its court-sanctioned debt restructuring exercise with creditors.
According to the group, it is already in talks with lenders to restructure its long-term debt and will begin scheme of arrangement briefings with its vendors soon.
"We acknowledge that our current difficult situation has impacted our vendors. The proposed scheme of arrangement, which require vendors' support, when approved, will enable the group to carry out a court-sanctioned framework for firm and committed payment to our vendors," said Anuar.
"The framework also ensures we can continue our operations and pay vendors in an orderly manner that is sustainable to our business. The group will endeavour to find a fair and equitable solution to all stakeholders," he added.
On the implementation of its strategic divestment plan, Anuar said businesses and assets that are not core to its future business direction will be divested to reduce its debt.
"We will be selective in our bids to focus on preferred regions, namely Asia-Pacific and the Atlantic, where we can be competitive.
"We will be shifting the balance of our project portfolio in the short to medium term towards transportation and installation; and anchor our construction activities at the Lumut fabrication yard," he said.
Shares in Sapura Energy closed half a sen or 14.29% higher at four sen on Friday, giving it a market capitalisation of RM559.27 million.