Nam Cheong profit skyrockets in Q2

Nam Cheong Limited,  Malaysia’s largest Offshore Support Vessel (“OSV”) builder, today reported revenue rising 38% to RM378.8 million in the three months ended June 30, 2014 (“2Q 2014”) from RM275.3 million in the corresponding period last year (“2Q 2013”).

This strong performance boosted net profit by 53% to RM63.0 million from RM41.1 million in 2Q 2013.

Datuk Tiong Su Kouk, Executive Chairman of Nam Cheong, said: “This solid set of financial performance points to the buoyant demand for our vessels amidst increasing opportunities in the industry. On a year-to-date basis, Nam Cheong has achieved strong orders for 13 vessels worth approximately US$290 million.”

“Beyond the pursuit of financial performance, we are also mindful of the need to remain committed to good corporate governance practices for the benefit of our stakeholders.

“In this regard, we are honoured to have won the Bronze for the prestigious Best Managed Board Award at the Singapore Corporate Awards 2014 earlier last month. This award is a testament and reminder for us to remain focused on maintaining excellent Board processes while progressing towards our aim in being a leading global OSV player.”

Financial Review

In 2Q 2014, Nam Cheong’s core shipbuilding segment achieved a 37% rise to RM355.6 million from RM259.2 million in 2Q 2013, mainly attributable to the progressive recognition of revenue from the sale of Platform Supply Vessels which contributed RM228.5 million or 60% to the Group’s total shipbuilding revenue for 2Q 2014.

The Group’s vessel chartering segment saw a 44% surge in revenue to RM23.2 million, resulting from the addition of two new vessels to its chartering fleet since 2Q 2013. The shipbuilding segment contributed 94% of Nam Cheong’s top line while the vessel chartering segment contributed 6%.

In line with the rise in revenue, gross profit rose 24% to RM67.0 million in 2Q 2014 from RM53.8 million in 2Q 2013. Gross profit margins for these two periods were maintained at healthy levels of 18% in 2Q 2014 and 20% in 2Q 2013 respectively. Other income more than doubled in 2Q 2014 to RM7.6 million from RM3.2 million mainly as a result of net fair value gain on derivatives and net foreign exchange gains.

Due to the higher Medium Term Notes’ interest expense and the amortisation of debt issuance cost, finance costs increased to RM3.8 million in 2Q 2014 over 2Q 2013’s RM1.6 million. Net profit after taxation for 2Q 2014 saw a 53% rise to RM63.0 million, in line with the overall improvement of revenue compared to RM41.1 million in 2Q 2013.

Outlook

In its quarterly report, Nam Cheong said the global and regional outlook of the Exploration and Production (“E&P”) sector remains upbeat, with global spending expected to hit US$1 trillion in 2017.

As a result of steadily increasing crude oil prices over the past few years, strong interest in the oil and gas E&P sector is boosting strong demand and profitability for the offshore industry.

In Malaysia, which continues to be Nam Cheong’s most important market, the oil and gas sector’s medium term performance is expected to be robust with Malaysian OSV operators to benefit from Petronas’ capital expenditure push. The Group’s robust order book as at July 1, 2014 stands at approximately RM1.7 billion, comprising a mix of shallow and deep water OSVs that are due for deliveries up to 2015.

“We remain focused on our core competencies in producing quality OSVs and the timely delivery of our vessels through our intimate knowledge of the market. Our efforts in being a customer focused vessel builder has paid off in helping us build a strong reputation in the industry not just regionally but also globally, as can be seen from the momentum of orders in the past few months.”

“Through our track record in securing repeat orders from our existing customers, we are confident of our strong position in the penetration of new markets and in
sustaining our lead in existing ones.”