KUALA LUMPUR (Feb 14): Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) incurred a net loss RM484.18 million for the year ended Dec 31, 2023 (FY2023), contrasting sharply with the RM67.77 million net profit recorded a year earlier, due additional cost provisions recognised for ongoing heavy engineering projects and the adverse impact of the weakening ringgit against the US dollar on the hedging of receivables for a heavy engineering project.
This was despite its full-year revenue recording a two-fold surge to RM3.31 billion from RM1.65 billion.
For the fourth quarter ended Dec 31, 2023 (4QFY2023), MHB's net profit tumbled 77.21% to RM6.18 million, from RM27.14 million in the previous year’s corresponding quarter, on lower operating income and higher finance costs.
As such, the group’s earnings per share declined to 0.4 sen from 1.7 sen in 4QFY2022.
In contrast, its revenue more than doubled to RM1.12 billion in the quarter under review from RM424 million a year prior, driven by revenue from the heavy engineering segment, which surged 213% year-on-year to RM1.02 billion.
Compared to the immediate preceding quarter, MHB returned to the black for 4QFY2023 compared to a net loss of RM105.21 million in 3QFY2023, primarily driven by partial recognition of cost recovery claims negated by the additional cost provisions for an ongoing project, while revenue climbed 75.17% from RM638.47 million.
On its prospects, MHB said the oil market is anticipated to improve further in 2024 — backed by forecast demand and high oil prices amid limited supply from continued production cuts by the Organization of the Petroleum Exporting Countries and its allies (Opec+) — should there be no further deterioration in the global economic situation and ongoing geopolitical tensions.
“However, if the Red Sea crisis escalates to war, this could give rise to all commodity prices. Until that happens, high oil prices would be favourable for oil majors to boost upstream capital spending for the year. In addition, the increasing significance of environmental, social and governance (ESG) will create multiple business opportunities for the group in the renewable energy space,” said the group in a bourse filing.
At the same time, MHB highlighted persistent challenges in the heavy engineering segment due to difficulties in adhering to the initially budgeted margins for ongoing projects, amid impact of escalating raw material prices and global supply chain disruptions.
The projects, secured under lump sum engineering, procurement, construction, installation, and commissioning (EPCIC) contracts from clients several years ago, are grappling with ongoing endeavours to recuperate from the impacts of inflation and schedule disruptions.
In the marine segment, MHB foresees intense competition persisting among industry peers, particularly due to the presence of new LNGC-repair yards in China and other neighbouring countries.
Despite that, the group said it is actively pursuing more dry-docking opportunities with major liquefied natural gas players and engaging in conversion projects, given the uptrending oil prices and stabilised oil and gas market.
“The group will continue to explore opportunities in both domestic and international markets. With the novel offshore windfarm project awarded recently, the group will focus to pursue more renewable energy projects as well as those in the decarbonisation space.
“In consideration of the global supply chain issues, the group has taken steps to improve its contracting strategies with clients where possible through alliance concept, reimbursable or cost-plus basis to mitigate those issues. Notwithstanding the major challenges in some projects, the group remains committed to delivering all projects meeting clients’ requirements,” MHB added.
Shares of MHB closed one sen or 2.06% lower at 47.5 sen, giving the group a market capitalisation of RM752.24 million.