|Reflecting better cost controls despite continued pricing pressure
JAKARTA, Oct 28, 2016 - (ACN Newswire) - Wintermar Offshore Marine (ID:WINS) has reported 9M2016 operating results with profits growing by 197% YOY to US$ 7.1 million, reflecting better cost controls despite continued pricing pressure.
Owned Vessels recorded a 22% YOY rise in gross profit to US$ 10.1 million for the 9 months ended 30th September 2016. Although utilization of high tier vessels was higher than the previous year, there was a significant adjustment of charter rates which led to a YOY fall of 6% in Owned Vessel Revenues to US$ 47.2 million for 9M2016. Owned vessel margins were higher than the same period in the previous year only because of much tighter cost controls and warm stacking of ships. There were a number of projects which were completed in early 3rd Quarter that were replaced by contracts with new pricing leading to lower QOQ revenue.
Chartering gross profit from this division rose to US$ 2.4 million from US$ 1.8 million the previous year.
Gross Profit from other sources rose to US$ 0.8 million for 9M2016 compared to US$ 0.5 million the previous year because of increased fee based services.
Management continued to implement tighter cost controls and warm stacking which resulted in a decline in Owned Vessel Direct expenses of 12% YOY to US$ 37.0 million for 9M2016, mainly resulting from lower crew and fuel bunker expenses.
Gross Profit grew by 28% in 9M2016 to US$ 13.5 million from US$ 10.5 million for 9M2015. Overall gross margin improved to 19.3% in this reporting period from 13.8% in the same period last year.
Indirect Expenses and Operating Profit
Lower salaries and savings in utilities from a small downsizing in office space contributed to a 22% fall in Indirect Expenses. This resulted in a jump of 197% YOY in operating profit to US$ 7.1 million for 9M2016 from US$ 2.4 million in the previous corresponding period.
Other Income, Expenses and EBITDA
As we continued to pay down debt over the course of the year, interest expenses fell 10% to US$ 6.6 million.
In view of the current industry conditions there was an impairment loss taken on our fleet amounting to US$ 13.1 million, which contributed to a total pretax loss of US$ 14.1 million for the period.
EBITDA for 9M2016 rose by 23% to US$ 28.4 million as compared to 9M2015.
Net Income Attributable to Shareholders
Although the company saw a 197% improvement in profitability at the operating level, the decision to take an impairment loss resulted in a net loss attributable to shareholders of US$ 7.5 million for 9M2016, as compared to a net loss of US$ 2.7 million for the period 9M2015.
Assets and Gearing
The likelihood of an extended period of oversupply in the OSV industry, and future uncertainty in charter rates, the management have decided to take an impairment loss of US$ 13.1 million on the fleet. This represents 3.1% of our total assets. Net gearing fell to 53% as compared to 64% at end of 9M2015.
As expected, competitive pressures in the Offshore Supply Vessel (OSV) industry continued to push down prices for the longer term work awarded. This will likely put pressure on our gross margins for the coming months. Some of the contracts we had in the earlier part of the year have concluded, and there are not many new projects starting until early 2017, which has contributed to lower activity and utilization in the second semester of 2016 compared to 2Q2016. However, on the marketing front there have been some new tenders for work starting in 2017. In addition, news of OPEC targeting lower production has provided strong support for oil prices. This combined with the reduction in production costs may result in free cash flows for oil companies at a lower break-even oil price. If this trend continues, there could be an upturn in upstream activities late 2017-2018 as oil companies start to invest in exploration again.
A new Indonesian Minister of Energy and Mineral Resources in the 3rd Quarter 2016 seems to have turned the spotlight on the Energy sector. The Coordinating Minister of Maritime Affairs who was appointed as Acting Energy and Mineral Resources Minister, Luhut Panjaitan, has pledged to reform the regulations and some tax reliefs have been announced. The new Oil and Gas law is being finalized and is widely expected to provide better incentives to attract foreign investment into the oil and gas sector in Indonesia. After the difficult business environment and sharp cuts in investment which have seen some oil majors reduce their presence in Indonesia, any such incentives will be very welcome indeed.
Global Oil and Gas Outlook
Global oil demand and supply is expected to reach equilibrium in 2017 at demand growth projections of 1.4 million barrels per day. This is the basis for expectations of a gradual recovery in oil prices.
In addition, guidance from leading oil majors are indicating flat or slightly increased E&P expenditure budgets for 2017, the first time in 2 years that the consensus is not for severe cuts in expenditure. This is consistent with a lowering of break even prices as a result of significant cost deflation in oil services over the past two years.
Management's continued strategy to control costs while maintaining quality and safety should help the company win a good share of work in the coming months. However, as utilization increases, there will be some additional costs as vessels are taken out of warm stack conditions.
Our current contracts on hand as at end September 2016 is US$ 124 million.
Ms Pek Swan Layanto
PT Wintermar Offshore Marine Tbk
Tel: +62 21 530 5201 Ext 401
Source: PT Wintermar Offshore Marine Tbk
Sectors: Gas & Oil, Logistics & Supply Chain
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