KUALA LUMPUR (Feb 13): Dialog Group Bhd (KL:DIALOG) posted a net loss of RM129.49 million in its second quarter ended Dec 31, 2024 (2QFY2025), from a net profit of RM148.29 million a year ago.

The net loss — its first quarterly loss in 25 years — was mainly due to one-off impairment of investments amounting to RM134.72 million and project cost overruns in its engineering, procurement, construction and commissioning (EPCC) segment.

The oil and gas group reported a loss per share of 2.29 sen as compared to earnings per share of 2.63 sen in 2QFY2024.

Dialog Group has decided to discontinue the downstream specialty chemical plant producing malic acid in Kuantan, a venture it initiated in 2023, during the quarter under review. Consequently, it wrote off RM90.7 million for the capital expenditure incurred.

“Since September 2023, the price of malic acid across Southeast Asia has declined by 20-30%, primarily due to oversupply,” it explained. In addition, the ongoing volatility in the global chemicals market and te uncertain macroeconomic environment also contributed to Dialog's strategic decision to discontinue the project.

Furthermore, Dialog has fully impaired RM44 million in investment in a joint venture company involved in producing food-grade recycled polyethylene terephthalate pellets (rPET) due to the delayed commitment by brand owners to increase their recycled content, resulting in persistently soft demand for food-grade rPET.

In 2QFY2025, the group’s operating expenses increased 9% to RM822.45 million from RM754.35 million in 2QFY2024 while revenue fell 20.9% to RM680 million from RM859.21 million, as the group cited challenges encountered in EPCC projects, which resulted in higher costs.

“Nonetheless, the cost overruns and project losses have been addressed and accounted for as the projects approach completion,” it said.

For the first six months of FY2025, its net profit shrunk to RM21.48 million, less than 10% of the RM280.46 million it reported a year ago, as accumulated revenue fell nearly 20% to RM1.31 billion from RM1.64 billion.

Despite the challenges, Dialog noted that it remains cash-generative. The group generated RM409 million in net operating cash flow year-to-date, with an unrestricted cash balance of RM1.39 billion as of Dec 31, 2024.

Looking ahead, the group said it continues to prioritise its core businesses in upstream, midstream and downstream.

In the upstream segment, Dialog said it has commenced development of the Baram Junior Cluster Small Field Asset Production Sharing Contract following its final investment decision while studies for the Raja Cluster Small Field Asset Production Sharing Contract, awarded in December 2024, are currently underway.

As for midstream, Dialog said the segment remains a core focus, where it will undertake phased capacity expansions in Pengerang Deepwater Terminals (PDT) to solidify its position as a leading petroleum and petrochemical hub in the Asia-Pacific.

In the downstream business, the group said it remains cautious, with an emphasis on prioritising in-house projects.

Meanwhile, its associate Morimatsu Dialog (Malaysia) Sdn Bhd is investing RM250 million to expand its fabrication facilities in Pengerang, Johor to meet the demands and opportunities of specialised process modules and skids.

The group has also invested in renewable fuel storage facilities at its Dialog Terminals Langsat 3 to meet growing demand for low-carbon fuel alternatives. “Phase 1 will be operational with the first shipment expected this month. Phase 2 will be completed in September 2026,” it said.

Dialog’s share price has been on a decline since May 2020, falling from the RM3.90 to RM1.81 on Thursday, giving the group a market capitalisation of RM10.22 billion.