Malaysia's Nam Cheong Posts 2Q 2016 Revenue of $29.2M, Down 39% YOY

Malaysia's Nam Cheong Ltd., an offshore marine player and an offshore support vessel (OSV) builder, recorded a revenue of $29.2 million (MYR 117.4 million) for the June 2016 quarter (2Q 2016), down 39 percent compared to $47.9 million (MYR 192.7 million) a year ago, with the decline attributed to slower progressive revenue recognition from vessels sold by the shipbuilding unit and lower utilization rate at its vessel chartering segment.

Turnover at the firm's shipbuilding business fell to $28.4 million (MYR 114 million) in 2Q 2016, down 36 percent from $44.6 million (MYR 179.2 million), while revenue from the vessel chartering segment slipped 75 percent to $0.9 million (MYR 3.4 million) from $3.4 million (MYR 13.5 million) in the same period. Nam Cheong's net profit fell 74 percent to $0.7 million (MYR 2.7 million) in 2Q  2016 compared to $2.6 million (MYR 10.5 million) in the previous year.

"While oil prices have rebounded from the lows since the beginning of the year, the offshore and marine industry continues to be under pressure. This has invariably affected the flow of OSV orders. We continue to be prudent by tightening our cost management, and are glad to note that our shipbuilding segment’s gross profit margin has improved during the second quarter," Tiong Su Kouk, executive chairman of Nam Cheong said in the press release.

"With our significant cash and cash equivalent position of $64.8 million (MYR 260.5 million) as at Jun 30, a slowing rate of cash required for working capital purposes, and financing support from banks and bondholders, we believe these will provide us with the financial resilience to overcome the downturn. In addition, given the substantial deemed interest in Nam Cheong’s shares of close to 60 percent collectively held by the Board and the management team, shareholders can be assured that our interests are closely aligned with that of all stakeholders."

Meantime, the company said its gross order book at the end of first half 2016 stood at approximately $273.7 million (MYR 1.1 billion), comprising a mix of OSVs targeted for deliveries up till 2018.

Looking ahead, Nam Cheong expects the industry outlook to remain challenging despite recent improvement in oil price.

"As such, we anticipate the progress of vessel sales and shipbuilding activities to remain slow. In response to the challenges and to reduce cash out flows,we have deferred the delivery of vessels that are currently undergoing construction at our customers’ requests and at our own initiative," Leong Seng Keat, Nam Cheong’s Group CEO said.

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