Mermaid Maritime Reports Positive Results (Thailand)
Mermaid Maritime Public Company Limited (“Mermaid”) reported net profits of Baht 86.0 million in the financial year that ended on 30 September 2012 (“2012”), the first positive result since 2009. Net profits increased 153.3% compared to net losses of Baht 161.3 million in the financial year that ended on 30 September 2011 (“2011’).
As a group, Mermaid served over 20 clients during the year, with an increasing number of contracts being awarded in the Middle East. Total service income in 2012 was Baht 5,714.1 million, an increase of Baht 171.3 million, or 3.1%, from the previous financial year. The service income increase was significantly driven by the Subsea Division, where Subtech and Seascape increased revenues by 69.6% and 43.8%, respectively. Gross profits increased 59.5% to Baht 1,202.6 million due to better vessel and project cost management.
Management reviews performance using different metrics. On two key metrics, Mermaid improved significantly in 2012. Earnings before interest, taxes, depreciation, and amortisation (“EBITDA”) rose 18.2% to Baht 1,371.7 million for a 24.0% margin. Earnings before interest and taxes (“EBIT”) rose 239.9% to Baht 489.2 million for an 8.6% margin. The EBITDA and EBIT improvement was driven by increased business from the Subsea Division, particularly Subtech and Seascape, and the Drilling Division, as the fleet had higher utilisation.
Interest expenses increased 24.5% to Baht 284.9 million in 2012, primarily due to the termination of an interest rate swap. Mermaid has no outstanding interest rate swaps as at end of the financial year.
Otherwise, the average loan balance and average interest rate fell in 2012. As a result of our fundamental improvements, including changes in working capital, net cash generated from operations increased from Baht 6.3 million in 2011 to Baht 974.6 million in 2012.
As evident from the financial results, Mermaid is seeing a significant improvement in its business environment and is optimistic about this improving trend into the current financial year.
Mermaid’s assets are only as good as the people who operate them. To this end, Mermaid continued to streamline its work processes across all support functions to ensure better cost controls and synergies.
The Subsea Division generated EBIT in 2012 of Baht 489.2 million compared to an EBIT loss of Baht 143.9 million in 2011. Of particular note, Subtech reported EBIT in 2012 of Baht 113.0 million, an increase of Baht 55.5 million, or 96.5%, from 2011 due to more project awards in the Middle East region resulting in a record year for Subtech. Seascape Surveys Group reported operating profits in 2012 of Baht 52.6 million, a decrease of Baht 23.3 million from 2011. Excluding a one-time tax penalty of Baht 38.7 million, EBIT would be Baht 91.3 million, an increase of Baht 15.4 million, or 20.3%, from 2011.
The Drilling Division generated Baht 1,089.3 million of revenues, a 7.9% increase from 2011, and Baht 277.5 million of EBIT, a Baht 397.7 million increase from 2011. ‘MTR-2’ achieved high utilisation rates of 91% in 2012, while ‘MTR-1’ was idle for more than half the year before beginning work as an accommodation barge. The overall rig fleet utilisation increased from 47.9% in 2011 to 64.6% in 2012.
Given the old age of ‘MTR-1’ and ‘MTR-2’, Mermaid made a major strategic move into the offshore jack-up drilling rig business through the establishment of Asia Offshore Drilling Limited (”AOD”), which currently has three (3) high-specification jack-ups under construction at Singapore Keppel FELS Limited (”KFELS”).
Mermaid owns 33.75% of AOD after two rounds of fund raising in the international capital markets, first in November 2010 and second in June 2011. To date, Mermaid has invested US$ 63.8 million into AOD.
Following Seadrill Limited’s (“Seadrill”) participation, all technical and commercial management agreements for AOD were transferred from Mermaid to Seadrill to leverage on their significant market leadership, reputation, and marketing strength to position AOD, to gain economies of scale and compete more effectively against new-build jack-up rigs that will be delivered around the same time.
All three (3) jack-up rigs will be delivered in the first, second, and third calendar quarters of 2013, and the outlook for this business is very positive.
December 25, 2012