Bumi Armada slips into red due to impairment

It would have otherwise posted net profit of RM84.8mil

PETALING JAYA: Bumi Armada Bhd posted a net loss of RM291.53mil in the second quarter ended June 30, from a net profit of RM98.38mil a year ago.

In its filing with Bursa Malaysia, the group said the net loss was due to a non-cash impairment charge of RM383.7mil it took during the quarter.

Bumi Armada said excluding the charge, it would have recorded an adjusted net profit of RM84.8mil.

The impairment was a write down of the carrying value of certain vessels in the transport and installation (T&I) and offshore support vessel (OSV) business units, and a non-core asset held in a joint venture. This was in view of the weak outlook for the oil and gas sector, it said.

Revenue also fell to RM459.08mil during the period from RM590.08mil previously due to lower utilisation of the vessels under the OSV and T&I business units.

Floating production storage and offloading (FPSO) and floating gas solutions (FGS) revenue was also lower as Rainbow 1 was sent to the shipyard for the Madura FPSO project during the quarter.

“The group continues to generate positive net operating cashflows and core profit, driven by our FPSO business. The projects under conversion remain on track and we expect the group to continue to generate positive operating cashflows and EBITDA (earnings before interest, tax, depreciation and amortisation) going forward,” said executive director and acting chief executive officer Chan Chee Beng in a statement.

Bumi Armada has an order book of RM25.8bil, with potential extension options worth RM13.3bil, which will provide steady cashflows and earnings in the future, it said.

For the first half, the company posted a net loss of RM219.48mil from a net profit of RM163.16mil last year. Revenue was 2.6% lower at RM1.031bil from RM1.059bil in the first half a year earlier.

The company attributed its performance to lower revenue from the T&I and OSV segments. Growth in FPSO and FGS revenue was driven by increased conversion activity from the Eni 1506 FPSO project, initial recognition of FGS revenue from Armada LNG Mediterrana, and contributions from tanker operations and operations and maintenance activity from the Armada Claire.

Bumi Armada’s EBITDA for the first half increased to RM556.5mil, driven by the FPSO business unit, which provides steady cashflows.

The low oil price continues to dampen sentiment and activities in the offshore oil and gas services sector, and the market is likely to be challenging through 2016.

“We are actively monitoring the performance of all business units, and will focus on further improving the productivity and efficiency of the group, including additional cost reduction measures, as may be necessary,” the group said.

While the OSV and T&I businesses would continue to be volatile, the FPSO business remained robust on the back of long-term firm contracts and the on-going conversions, Bumi Armada said.

Its new FPSO vessels would start to come on-stream in 2016, it added.