AMERICAN independent scholar and futurist Joel Barker once said: “Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world.”
This is the philosophy adopted by PFC Engineering Sdn Bhd group executive chairman Datuk Abu Talib Mohamed.
“I provide the vision. I make the board realise how we should achieve that vision, and they translate it into action,” he says.
Four to five years ago, nobody would believe him when he said PFC Engineering would be bringing in billion-ringgit contracts. Today, when he speaks about contracts worth RM1bil to RM2bil, the board believes it and supports the company in its effort to get those contracts.
PFC Engineering is a group that provides integrated engineering services to the oil and gas (O&G) industry. It specialises in engineering, procurement, construction and commissioning (EPCC) activities; facilities maintenance services and trading of materials, tools, mechanical parts and equipment.
The group services both brownfield and greenfield onshore and offshore projects. Brownfield sites are industrial and commercial facilities that have been abandoned or are underused but are available for re-use. Greenfield sites, on the other hand, are typically sites that have no existing structure.
Originally, the group was formed to do engineering works for Perwaja Holdings Bhd in 1996. “We were the in-house contractor for Perwaja. We reinvented ourselves to move into O&G to adopt the engineering standards. This is so that the engineering standard in Perwaja is much higher than others in the industry,” Abu Talib says.
A company separate from Perwaja now, PFC Engineering has, for the past decade, affiliated itself with the likes of O&G big players such as Petroliam Nasional Bhd (Petronas) group of companies, Malaysia LNG Sdn Bhd, PETRONAS CHEMICALS GROUP BHD, Sarawak Shell Bhd and Murphy Sarawak Oil Co Ltd. Since it secured its first maintenance contract with PETRONAS GAS BHD in 2002, the group has been building up a strong track record to showcase its capabilities and expertise which includes undertaking full-scale EPCC projects.
Currently, PFC Engineering has 40 ongoing service maintenance contracts which comprise upstream and downstream O&G facilities maintenance projects. These contracts provide a recurring revenue stream to the group.
In order to bring PFC Engineering forward in the O&G business, Abu Talib realised the need to have a listed vehicle. “I identified APP Industries Bhd (APPI) as a potential company that can be used for this purpose. It was a small company with a clean balance sheet. So, I made the decision to buy APPI with the intention of moving into O&G.”
APPI was involved in the ceramic and porcelain manufacturing business. PFC Engineering actually had a 40% stake in APPI. In July 2011 APPI was renamed PFCE Bhd.
He mentions that at that point in time, there was no intention for PFCE to take over PFC Engineering. The only intention was to develop PFCE into the O&G business. “However, we foresaw that it would be easier to put PFC Engineering's business into PFCE. This is why we announced to Bursa Malaysia to carry out a reverse takeover exercise (RTO) to acquire 100% equity interest in PFC Engineering,” Abu Talib says.
The RTO would see PFC Engineering being injected into PFCE for RM300mil which would be satisfied by the issuance of 500 million new PFCE shares at 60 sen per share. Abu Talib and his son, group business development director Muammar Gadaffi Abu Talib own 80% and 20% in PFC Engineering respectively. Abu Talib and his son will then transfer their collective shareholding in PFCE to a new company called DAT Sdn Bhd via dividend-in-specie for about RM15.8mil.
PFC Engineering would declare up to RM24mil cash dividend to DAT. DAT would then propose to seek an exemption to extend a mandatory general offer for all the remaining PFCE shares not already held by them.
Under the exercise, DAT would also place out up to 90 million PFCE shares and proposed restricted offer for sale of up to 52.838 million PFCE shares at an offer price to be determined later.
Currently the proposal for the RTO has been submitted to the Securities Commission. Abu Talib and his team expect the approval to come by the fourth quarter of this year. Once completed, PFCE will have a 100% stake in PFC Engineering.
After the RTO, Abu Talib intends to keep the ceramic business and PFCE will be running two businesses. However, he foresees the O&G business will remain a major part of PFCE's operations, while the ceramic business will only make up less than 5% of it.
In regard to the future of the ceramic business, Abu Talib says, “We are looking at different ways to reinvent the business. Currently, the bulk of the business is being exported to Europe and the United States. We are looking to increase the domestic business.”
He says a team is working on the ceramic business plan. “We are looking at cost-cutting and cost management measures, the introduction of new products and marketing outlets to tap the retail market,” Abu Talib says.
The group expects this year's results to be better than last year's. In the financial year ended Dec 31, 2011 (FY11) PFCE reported a 18.92% increase in revenue to RM23.368mil compared to the previous year. However, its net loss widened to RM2.193mil from RM271,000 in FY10. Abu Talib attributed the loss to impairments to some of PFCE's assets and the incorporation of the new Financial Reporting Standards.
He expects PFCE to turn around this year. Part of PFC Engineering's future plans is to diversity into the development of marginal oil fields. A marginal oil field is defined as a field that can produce an equivalent of 30 million barrels of oil or less. Malaysia has a total of 106 marginal oil fields containing 580 million barrels of oil. So far, there are 25 marginal oil fields that have been identified for development.
Petronas will award these marginal oil field contracts. Requirements for selection include being a listed company with a good balance sheet and having an international operative partner.
“By having a listed company, we fulfil that requirement. The second part would be to identify the foreign partner which is suitable for us to work with. We are currently talking to three different parties from the United States, Canada and Australia,” Abu Talib says.
PFC Engineering does not have platform operational experience, hence the need for an international partner. “We require international partners with strong background and experience in the operations of the offsite facilities. There are not many of them in the market. Our criteria will be based on the experience they show, and their financial strength,” he adds.
He expects to be able to bid for a marginal oil field contract by next year, after the RTO has been complete. “We still have to go through the selection process, but before we do, we need to make sure we meet Petronas' requirements,” Abu Talib says.
Over the years PFC Engineering has invested a lot in facilities and infrastructure. “In 2011 alone we spent RM14mil cash in developing our facilities. This included a 32-acre facility in Kerteh, five workshops in Kemaman and also in our people in particular young engineers. Investing in capabilities is something that we believe will be the future for PFC Engineering,” he says.
Other future plans include embarking on strategic mergers and acquisitions (M&As). It hopes to expand its trading business via its subsidiaries for the supply of safety, security and metering systems. PFC Engineering will also leverage on the demand for facilities maintenance and EPCC services to secure more contracts and businesses.
Abu Talib says, “What is important is to add value to the company and its shareholders. It is also important to build the company's capabilities, which includes reinvesting profits to enhance its capabilities and assets.”
The O&G sector is the most active sector in the Malaysian economy. “The future is very bright for this industry,” Abu Talib says. The Refinery and Petrochemical Integrated Development (Rapid) which is part of Petronas' capital expenditure plans will have jobs worth a total of RM60bil to complete by 2016. Rapid is an integrated refinery and petrochemical complex spanning over 2,000 ha in Pengerang, Johor. It will comprise a power plant, crude oil refinery, a naphtha cracker and a petrochemical and polymer complex. It is expected to produce 9 million tonnes of petroleum products and 4.5 million tonnes of petrochemicals per year.
Abu Talib adds, “So, there are a lot of jobs available. We have to be focused on which segment of the industry we want to go into based on our strengths and core competencies, which is providing engineering capabilities.”
He says the biggest challenge the group faces is the shortage of manpower in specialised engineering fields.
A special feature of PFC Engineering is that all of Abu Talib's children are in the business. His three sons and daughter have taken up roles in the company and are helping to build the company's brand. He jokingly says, “They were forced to.” He says he is both proud and happy that his children are in the business alongside him.
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