Singapore's Vallianz Holdings Limited (Vallianz or Company, and together with its subsidiaries, the Group), an established provider of offshore support vessels and integrated marine solutions to the oil and gas industry, reported Monday that its net profit for the three months ended March 31, 2016 (1Q 2016) remained stable at $5.5 million.
Group revenue of $49.3 million in 1Q 2016 was down 18.8 percent year-on-year from $60.7 million in 1Q 2015. This was due mainly to the completion of ship management projects in late 2015, lower average charter rates and a change in the revenue mix of its offshore support vessel (OSV) chartering and brokerage business and ship management services. At the end of 1Q 2016, the Group owns and operates 42 OSVs.
The chartering and brokerage business accounted for a higher 69 percent of revenue in 1Q 2016, compared to 63 percent in 1Q 2015.The remaining 30 percent of Group revenue was derived from ship management & shipyard services and investment segments.
Although total revenue was lower in 1Q 2016, the Group was able to increase its gross profit margin to 29.3 percent from 26.4 percent in 1Q 2015. This was attributed mainly to the higher revenue contribution of the Group’s OSV chartering business, coupled with the benefits from its ongoing efforts to maximize cost savings from vessel operations and labor expenses.
In addition, the Group’s administrative expenses fell 28.0 percent year-on-year to $4.0 million in 1Q 2016 as a result of its concerted efforts to optimize its cost structure in late 2015. The completion of a refinancing exercise for the Group’s Middle East operations also led to a 24.0 percent reduction in finance costs in 1Q 2016.
As a result of its cost rationalization efforts, the Group posted a steady net profit of $5.5 million in 1Q 2016 compared to $5.6 million in 1Q 2015. The strategic actions taken to lower its overall cost structure helped to mitigate the impact of lower Group revenue and a reduced share of results of associate and joint ventures which fell by approximately $1.2 million in 1Q 2016.
CEO of Vallianz, Ling Yong Wah said, “The resilient performance in the first quarter shows that we are steering the Group in the right direction. With the majority of our chartering and brokerage business backed by long-term charter contracts, the Group continues to achieve healthy fleet utilization rates.
We are also securing new charter contracts to build on our order book. The Group today unveiled a new long term charter contract win worth up to $63 million for the supply of 2 OSVs to a national oil company (NOC) in the Middle East. This latest award raises Vallianz’s order book to approximately $950 million, comprising mainly long term time charters stretching up to 2024.”
“While continuing to pursue new charters, the Group has also rationalized our overall cost structure to align to current market conditions and enhance our market competitiveness. We reviewed our vessel operating costs, labor and administrative expenses, and took effective actions to maximize cost savings in these key areas.
We have also been working conscientiously to strengthen our balance sheet. In addition to lowering our finance costs, the successful Sukuk issuance to refinance our operations in the Middle East has also led to an improvement in the Group’s net gearing to 0.7 times as at March 31, 2016 from 1.26 times at the end of FY 2015.
The positive results of all these efforts to enhance the Group’s financial position and improve operational and organizational efficiencies are reflected in our financial performance in 1Q 2016,” said Ling.
Despite the strong industry headwinds, Vallianz is one of few OSV providers that has secured long-term charter contracts. This can be attributed to the Group’s operational excellence and organizational capabilities, as well as its strong market reputation in the Middle East where there is still high levels of offshore oil production activity.
Given the current business climate, the Group’s focus will remain on delivering operational and service excellence to customers while working to further optimize its operations and cost structure. It will also continue working to maintain its superior market position in the Gulf region. The Group is presently bidding for charter contracts with a combined value of $1.7 billion, mainly for projects located in the Middle East.
In a separate press release, Vallianz provided more details about its time charter contract to supply two OSVs to a NOC in the Middle East.
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