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Quarterly Report For The Financial Period Ended 30 September 2018

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Unaudited Condensed Consolidated Statement Of Profit Or Loss
For The Quarter And Year-To-Date Ended 30 September 2018

 Income Statement

Condensed Consolidated Statement Of Financial Position
As At 30 September 2018

Financial Position

Review of performance of the Company and its principal subsidiaries

(a) Financial review for current quarter and financial year to date

Review of performance

OPERATING SEGMENTS REVIEW

3Q 2018 vs 3Q 2017

(I) Operating Revenue

Chartering Division

- Revenue generated from chartering division has declined by 29% in 3Q 2018 as compared to 3Q 2017 mainly due lower utilization of vessels.

Shipbuilding Division

- Revenue generated from shipbuilding division has declined by 43%. This is mainly due to less activities in ship repair and also ship building division.

(II) Operating loss

- The operating loss for 3Q 2018 has reduced by 55% mainly due to the lower fixed cost incurred by the vessels sold in Q2.

Material changes in the quarterly results compared to the results of the preceding quarter

Review of performance

Group consolidated revenue has a slight decrease of 13% to RM11.2 million compared to the preceding quarter of RM 12.9 million due to lower utilization of vessels.

The increase in loss before tax for the current quarter is mainly attributed to the following:

  • Gain on disposal of three (3) vessels in Q2

  • Reversal of loss of result of an associate of RM5.8m in Q2

  • Docking expenses and activation cost of vessels incurred in Q3 to prepare vessels for charter

Commentary on prospects

Although market sentiments are still cautious, there is more optimism over prospects for the oil and gas industry in light of moderate oil price recovery trend. The Group will continue to manage costs and increase efficiency in this turbulent economic climate to improve our competitiveness and resilience. Riding on our strong foundation, we are confident that the Group will achieve good results going forward.

Based on industry analyst reports, oil prices will hover around USD50 to USD70 per barrel in 2018 as crude prices have rallied on the extension of OPEC and non-OPEC members' production cuts, and the market could refocus on the revival of US shale gas production. Improved oil prices have led to a steady rise in activities as evident in the number of active drilling rigs and this should trigger more business opportunities in the industry. The Group believes that the steady oil price recovery in recent months have led to the increase of activities in the offshore segment. Such optimism is expected to boost the number of projects approved which will also represent opportunities for the Group. The oil and gas sector is expected to continue on a recovery path with upstream companies gradually stepping up production and boosting other firms involved in the industry. Earnings upgrades over the past few months have come on the announcements of drilling contracts won as they have reaffirmed the analysts' view that rig utilisations are improving.

According to Kenanga Research, tendering activities have been on the rise and oil majors are reviewing projects suggesting that they are relatively more upbeat on the upstream sector following the stabilisation of oil prices.

Petronas' Activity Outlook for 2018-2020 also indicates most upstream sub-segments' activities in 2018 were revised higher compared to the previous report. Research indicates that the upward revision could be due to the delayed work orders last year being pushed to 2018 which may potentially lead to better contract flows and further provide order-book replenishment opportunities for the supporting sectors.

The world's largest international shipping association, BIMCO, has released its macroeconomics assessment for 2018 based on current trends and events. BIMCO referred to the International Monetary Fund'S (IMF) World Economic Outlook which showed it has revised its forecast for global growth in 2018 and 2019 - up by 0.2% to 3.9% for both years. BIMCO stated it has been quite some time since macroeconomics development has looked this positive and as supportive of shipping. Improving the economic growth potential through structural reforms supports productivity, and thereby improves the medium and long term derived demand for the shipping industry.

The Group will continue its emphasis on its core activities of ship building, ship charter and ship repair. The Group's shipbuilding division will be looking towards building vessels which have a niche market as well as enhancing its docking (ship repair) facilities, whilst continuous efforts will be taken towards optimising capacity utilisation of the Group's vessels. The Group is also looking at building new vessels that are more energy efficient and environment friendly, in line with tighter environmental regulations in the maritime industry. With the ongoing initiatives in sustainable cost rationalisation and exposures, we believe the Group is well positioned to tide over the current business challenges, of which the worst seem to be over.

With the Government lending stronger support to the maritime industry with the recent launch of the Malaysia Shipping Master plan, the country is set to become a self-sufficient and internationally competitive nation, that can benefit us along the maritime industry supply chain.

Barring any unforeseen circumstances or events, The Board is optimistic that demand for offshore marine support vessels will improve with further increased expenditure in offshore oil field development and maintenance work by the oil majors. The outlook is improving in anticipation of a shipping recovery.