CEO Morning Brief

MISC Posts Weaker 4Q on Lower FPSO Project Progress, Heavy Engineering Segment Losses

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Publish date: Thu, 23 Nov 2023, 08:55 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 22): MISC Bhd's net profit fell 47.55% year-on-year (y-o-y) in the three months ended Sept 30, 2023 (3QFY2023), in absence of a one-off gain from its petroleum and products shipping segment, lower vessel conversion progress, and losses in its 66.5%-owned subsidiary Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE).

Quarterly earnings fell to RM430.4 million or 9.6 sen per share, from RM820.6 million or 18.4 sen per share the year before — MISC’s strongest quarterly performance since 2014.

Revenue also declined 6.89% to RM3.37 billion in 3QFY2023 from RM3.61 billion in 3QFY2022, as revenue growth from gas shipping and heavy engineering segments more than offset the weaker petroleum business and offshore business contributions.

The shipping group declared a third interim dividend of seven sen per share for FY2023, bringing total dividends for the year to 24 sen per share, up from 21 sen a year earlier.

In a filing with Bursa Malaysia on Wednesday, MISC noted better contribution from its biggest contributor — the gas shipping business — on the back of higher charter rates and earning days following the deliveries of two liquefied natural gas carriers in 1Q2023.

This brought the segment profit 20% higher to RM427.9 million, from RM355.1 million.

The petroleum segment, however, saw lower earning days, on the absence of a one-off compensation booked last year for a contract renegotiation, resulting in lower operating profit of RM296.2 million, from RM470.7 million.

The offshore business saw lower project progress and construction gain from the conversion of a floating, production, storage and offloading (FPSO) unit, coupled with cost provisions recognised over an incident involving an asset earlier this year. The segment's operating profit fell to RM58 million as a result, from RM190 million.

MMHE, meanwhile, booked operating loss of RM100.3 million from profit of RM19 million, on price escalation impact on projects, despite higher revenue incurred.

On a quarter-on-quarter (q-o-q) basis, MMHE saw lower additional cost additions, which helped push operating profit 22.3% higher to RM649.9 million from RM531.3 million, despite a 5.2% decline in revenue due to lower revenue by MMHE.

However, MISC’s net profit fell 4.97% q-o-q from RM452.9 million in 2QFY2023, taking into account lower losses attributable to non-controlling interests of RM31.7 million, from RM131 million.

For the nine months ended Sept 30, 2023 (9MFY2023), MISC’s net profit rose 27.02% to RM1.5 billion, from RM1.18 billion, as revenue rose 3.09% to RM9.99 billion, from RM9.69 billion.

On prospects, MISC said liquefied natural gas shipping market rates continue to see strengthening spot rates, adding it sees similar trends in the petroleum shipping segment after a period of softer conditions.

While oil prices are supporting the prospects of the floating production storage and offloading (FPSO) and heavy engineering businesses, MISC predicts a challenging marine sub-segment as vessel owners defer dry-docking ahead of rising energy shipment demand.

“Execution of some of the ongoing projects secured a few years ago remains challenging for its heavy engineering sub-segment due to additional cost and schedule impact, of which the recovery will continue to be pursued from clients,” it added.

At noon market break on Wednesday, shares of MISC slipped six sen or 0.82% to RM7.25, with 291,100 shares traded. Its market capitalisation stood at RM32.36 billion.

Source: TheEdge - 23 Nov 2023

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