Malaysia Marine & Heavy Engineering Holdings (MMHE) saw a turnaround in the first quarter on the back of higher revenue from its ship repair and engineering divisions.
The Pair Gudang-based company achieved revenue of MYR 417.8m ($95.1m) with a pre-tax profit of MYR 2.7m in the three months to 31 March.
Repair and maintenance work was undertaken on 16 vessels during the period, leading to the ship repair division registering revenue of MYR 59.4m, up from MYR 39.4m in the corresponding quarter in 2021, mainly due to higher dry-docking activities.
The repair segment brought in an operating profit of MYR 3.7m, against an operating loss of MYR 17.7m a year earlier, mainly due to reversal of impairment loss on trade receivables as doubtful debts were recovered, coupled with higher revenue from dry-docking activities.
The heavy engineering segment reported revenue of MYR 358.4m, up from MYR 304.2m, mainly due to higher revenue from an ongoing project.
The segment posted an operating profit of MYR 2.9m, a turnaround from the operating loss of MYR 85.1m in the first quarter last year, which was affected by additional cost provisions for an ongoing project.
The improved financial performance was also credited to the partial recovery of Covid-19 claims and the reversal of warranty provisions for a post sail-away project in the latest quarter.
Chief executive Encik Pandai Othman said the company holds a cautious outlook on the recovery of the repair and heavy engineering industries and will continue to pursue business opportunities in new regions and segments to replenish its orderbook.
Othman said the reopening of international borders and removal of compulsory quarantine requirements for fully vaccinated travellers by the Malaysian government are expected to lead to an improvement in the business prospects of MMHE’s ship repair division.
“The lifting of restrictions on the entry of foreign technical experts will increase our chances to secure more international projects,” he said.
“Additionally, other countries that are experiencing a spike in Covid-19 cases and reimposing targeted lockdowns may create opportunities for us, as their clients would have to look for alternative shipyards to conduct repairs.”
Commenting on the prospects of the heavy engineering sector, Othman said that with oil prices having risen sharply because of the Russia-Ukraine conflict, and the threat of oil demand exceeding supply recovery as many countries move out of pandemic mode, oil majors expect an increase in upstream capital expenditure spending in 2022, although not to the pre-Covid level.
However, he cautioned that global supply chain disruptions and increases in prices of raw materials such as steel due to the pandemic and the war in Ukraine may constrain the capital expenditure plans of MMHE’s oil major clients, as well as posing risks to its ongoing bids and current projects under execution.