MMHE posts 2Q net loss of RM397m on impairments

In a statement issued on Thursday, it said in 2Q there was an an impairment loss on property, plant and equipment and right-of-use assets amounting to RM300mil.

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) posted wider net losses of RM397.02mil in the second quarter ended June 30,2020 due to an impairment loss of RM300mil.

In a statement issued on Thursday, it said in 2Q there was an an impairment loss on property, plant and equipment and right-of-use assets amounting to RM300mil.

“This (impairment) is attributable to the collapse in demand for oil and energy owing to the Covid-19 pandemic resulting in most oil and gas companies deferring their upstream projects and cutting their capital spend.

“Moreover, the impairment is deemed necessary in anticipation of a prolonged recovery in the industry resulting from these exceptional events, ” it said.

Due to the impairment, the net loss was wider compared with RM9.47mil a year ago. Its revenue fell by 43.8% to RM155.31mil from RM276.45mil a year ago mainly due to lower revenue in the heavy engineering and marine segments.

It reported an operating loss of RM100.20mil compared to RM8.60mil loss a year ago mainly due to lower revenue, additional cost provision and associated higher unabsorbed overheads from Covid-19 impact of RM90mil recognised in 2Q. Loss per share was 24.8 sen compared with 0.6 sen a share.

Its heavy engineering revenue fell by 26.2% to RM112.10mil from RM151.90mil a year ago, mainly due to lower revenue from ongoing projects as progress was affected by the yard shutdown during the Movement Control Order (MCO) period.

In tandem with lower revenue, additional cost provision and related higher unabsorbed overheads from pandemic, the segment reported an operating loss of RM69.80mil in 2Q compared to an operating loss of RM19.8mil a year ago.

As for MMHe's marine segment, it posted RM43.30mil revenue compared with RM124.60mil revenue a year ago mainly due to lower number of secured vessels as the segment was badly impacted by the yard shutdown during MCO period coupled with pandemic global lockdown measures; restricting the docking of international clients' vessels into the yard.

The segment swung to an operating loss of RM30mi from an operating profit of RM8.60mil a year ago as the Covid-19 impact had resulted in much lower revenue and higher unabsorbed overheads.

MMHE said in 2Q, the group's revenue fell by 55.2% to RM155.31mi than the RM346.40mil in 1Q mainly due to lower revenue from both heavy engineering and marine segments, as a result of the yard suspension during MCO and border restrictions affecting marine business.

“The group reported an operating loss of RM100.20mil against an operating profit of RM5.60mil in the preceding quarter, mainly due to lower revenue and associated cost impact from Covid-19 of RM90mil recognised in the current quarter, ” it said.

For the first half, it posted net losses of RM390.89mil compared with RM38.84mil a year ago due to the RM300mil in impairment in 2Q. Its reveue was higher at RM501.74mil compared with RM479.56mil.

MMHE said for 1H, the heavy engineering segment successfully completed the construction of FSO Golden Star External Turret for its client.

The ongoing projects for the heavy engineering segment include the engineering, procurement, construction, installation and commissioning (EPCIC) of the centralised processing platform (CPP) for Bokor phase three redevelopment project; Pluto water handling module project; EPCIC works for the Kasawari gas development project, engineering, procurement, construction and commissioning (EPCC) of Bergading mercury removal unit (MRU) module for Bergading central processing platform-MRU integration project and EPCIC of supply and installation of new BEDP-A and BEDP-B WHP for Bekok Oil Project.

Earlier this year, MMHE’s unit, Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), has also secured a contract from Carigali-PTTEPI Operating Company Sdn Bhd (CPOC) to undertake the provision of offshore brownfield modification works for a duration of three years.

This award, which is part of an umbrella agreement, involves onshore fabrication and offshore modification services for CPOC facilities located within the Malaysia-Thailand Joint Authority (MTJA) area.

For the 1H, the marine segment completed the repair and maintenance of 18 vessels of various categories, of which two were from repair works on LNG carriers.

MMHE Group’s total assets and total equity at the end of the period under review stood at RM2.9bil and RM2bil, respectively.

Managing director and CEO Wan Mashitah Wan Abdullah Sani said: “Whilst we have resumed our yard operations from April 2020, our activities are still constrained to the 'new normal' with restrictions imposed to ensure that the pandemic is kept under control.

“We are also vigilant on the happenings around the world, mainly in the countries where we sourced our supply given the recent resurgence of Covid-19 cases globally, which could have an impact on the progress of our ongoing and projects which we had bid for.

“We see that the oil price has rebounded modestly on further Opec+ production cuts and resumption of economic activity from the easing of worldwide Covid-19 pandemic lockdowns.

“However, we expect the oil market revival to be slow and gradual with oil demand not expected to reach pre-pandemic levels for the foreseeable future.

“Given the prolonged oil market recovery outlook, we expect postponement of upstream projects and capital spending cuts by oil majors to persist and thus remain cautious on the prospect of securing new orders for the remainder of the year, ” she said.

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