MISC’s revenue up despite lower LNG earnings
MISC posted a group revenue for the first quarter 2015 of RM2,490.3 million, 8.7% higher than RM2,290.5 million in the corresponding quarter last year.
The increase in group revenue was mainly due to improved freight rates in petroleum business and commencement of finance lease income of a Floating, Production, Storage and Offloading unit in September 2014. However, a smaller fleet of operating vessels in chemical business and lower earning days in LNG business moderated the increase in group revenue, MISC said in a statement.
During the quarter, MISC entered into novation agreement for the construction and delivery of five new LNG carriers from Petronas. MISC also entered into time charter agreements with Petronas for the charter of the five newbuild LNG carriers.
The group has also secured 10-year lease extension on a time charter basis for five refurbished Puteri Class LNG carriers.
Group operating profit of RM468.2 million was 7.2% lower than the corresponding quarter’s profit of RM504.3 million, mainly due to lower revenue in LNG business and additional costs incurred on some heavy engineering projects. However, higher profit in offshore business and lower losses in chemical business helped to mitigate the decrease in group operating profit.
Group profit before tax of RM511.9 million was 3.0% lower than the RM527.9 million profit in the corresponding quarter, mainly due to lower operating profit in the current quarter.
The financial performance for the group in 2015 will continue to be underpinned by secure recurring income from a portfolio of long-term contracts in the LNG shipping and offshore business segments. Despite the severe drop in global oil prices in the past few months, petroleum shipping segment has found strength from sustained global oil production. Barring any material cutbacks in global oil production, the recent strength in petroleum shipping could be sustained for the year. Chemical shipping prospects remain mixed given uncertainty in demand as a result of sluggish growth in certain economic zones.
However, it will be a challenging year for the oil and gas services segment, such as fabrication and construction given the reduction in capital and operating expenditures by major oil companies in a low oil price environment. The group’s heavy engineering business will draw on its present order book along with other cost management and operational excellence initiatives to sustain profitability during the year.