Malaysian LNG shipper MISC, a unit of energy giant Petronas, reported an 81 percent year-on-year increase in its net profit in the second quarter to 1.35 billion Malaysian ringgit ($334.4m).
MISC’s revenue for the quarter ended 30 June 2016 of 2.4 billion Malaysian ringgit was 8 percent lower when compared to the corresponding quarter.
The decrease in revenue was mainly from the shipping company’s Heavy Engineering business due to fewer and lower value of projects in progress in its Heavy Engineering sub-segment and lower number of rig repairs and conversion works in its Marine sub-segment, MISC said in its results report.
LNG business also recorded decrease in revenue from operating a smaller fleet of vessels and lower charter rates earned on new contracts. LNG revenue of 627 million Malaysian ringgit was 7.5% lower than the corresponding quarter’s revenue.
However, with the recent completion of the 50 percent equity buyback of Gumusut-Kakap Semi-Floating Production System, GKL’s results have been fully consolidated from the said date, mitigating the decrease in revenue for the current quarter, MISC said.
“The second quarter showed mixed results that are impacted by lower contribution from our Heavy Engineering and LNG businesses. Nonetheless, balancing the scale, the completion of the acquisition of Gumusut-Kakap Semi-Floating System Ltd. (GKL) as well as steady contribution from our Petroleum business have contributed to strengthening our financial position considerably,” said MISC’s CEO, Yee Yang Chien.
Group operating profit of 500 million Malaysian ringgit was lower than the corresponding quarter’s profit of 672.1 million Malaysian ringgit, mainly due to higher depreciation in LNG and Petroleum businesses from the change in estimated useful life of vessels totaling 105.2 million Malaysian ringgit. Heavy Engineering business also recorded lower operating profit in line with the decrease in its revenue. However, Offshore business recorded higher operating profit following completion of the 50% equity buyback of GKL in the current quarter, MISC said.
Commenting on MISC’s plans ahead, Yee said “Moving forward, we expect no less than a challenging year ahead with the current slump in the global oil and gas sector. However, our priorities remain unchanged and the future growth of MISC will be guided by our 5-year business strategy towards attaining a sustainable level of secured profits by FY2020. For this purpose, our emphasis is on advancing the growth of our four core business segments in LNG, Petroleum, Offshore and Heavy Engineering businesses.”
High global stock level is expected to dampen demand for the movement of crude oil in the immediate term. Coupled with projected larger delivery of new petroleum tankers in second half of 2016, freight rates may come under some pressure. However, this will be compensated by rising seasonal demand towards the end of the year, according to MISC.
Meanwhile, the market for LNG vessel spot charter remains weak due to the escalating oversupply of vessels. This negative outlook is expected to remain throughout the year, MISC said.
“On a positive note, the Group’s present portfolio of long term charters that are in place will underwrite a steady financial performance for MISC’s LNG fleet for the rest of the year,” the shipping company added.
1 Malaysian ringgit = 0.247712 U.S. dollars