MMHE posts 2Q net loss of RM388.7mil on provisions for ongoing projects

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) sank into the red in the second quarter ended June 30, 2023, with a net loss of RM388.7mil as compared to a net profit of RM22mil in the previous corresponding quarter on the back of additional cost provisions in the heavy engineering segment.

This led to the group incurring a loss per share of 24.3 sen against earnings per share of 1.4 sen in 2QFY22, according to a filing with Bursa Malaysia.

For topline, however, MMHE posted a revenue of RM1.06bil in the quarter under review, which was more than double RM400.63mil registered in the same quarter in 2022.

According to the group, the provisions were owing to a revised schedule for ongoing projects, which caused the extension of delivery dates.

It noted however that the Kasawari project sailed-away offshore after the second quarter reporting period, which met the requirements of the client.

"The group is committed to working closely with all relevant parties including the clients, subcontractors and vendors to identify and recover the additional costs incurred," it said.

In the six months period to June 30, 2023, MMHE's net loss was RM385.16mil on revenue of RM1.55bil against a net profit of RM24.69mil and revenue of RM818.41mil in the same period in 2022.

The group said total assets and total equity at the end of the period under review stood at RM3.6bil and RM1.3bil, respectively.

On outlook, MMHE managing director and CEO Pandai Othman said capex spending is expected to be elevated beyong the pre-pandemic level as oil prices are expected to remain high for the rest of the year in view of the continued demand from China coupled with supply shortages from Opec+ production cuts.

"In addition, the increasing significance of environmental, social and governance (ESG) will create multiple business opportunities for us in the renewable energy space," he said.

The heavy engineering segment is also anticipated to continue facing challenges due to the impact of raw material price increases and the global supply chain disruption.

"These projects were awarded on a lump sum EPCIC basis by clients a few years ago. We will continue to pursue the recovery of these inflationary and schedule impact from clients," said Pandai.

He added that there is expected to be an increase in demand for dry-docking activities as vessel owners prepare for a rise in seaborne trade requirements for the remainder of the year.

However, the segment will remain challenging as China's reopening of borders will facilitate stiffer competition among shipyards.

"We are also looking into ways to improve our contracting strategies with clients through alliance concept or cost-plus basis, where possible, to mitigate the risks of global inflation for future projects," said Pandai.

He added that the group remains committed to delivering all projects to clients' requirements while working closely with all relevant parties to recover the additional costs.