KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) posted a net loss of RM105.21 million in its third quarter (Q3) ended Sep 30, 2023 (FY23) dragged by additional cost provisions for ongoing heavy engineering projects and weakening of the ringgit against the US dollar.
It made a net profit of RM15.95 million in Q3FY22.
The heavy engineering segment raked in a revenue of RM570.2 million in the current quarter compared to RM320.1 million in the corresponding quarter last year mainly due to higher revenue from new and ongoing projects.
Despite the higher revenue however, the segment recorded an operating loss of RM107.7 million in the current quarter compared to an operating profit of RM1.4 million in the corresponding quarter mainly due to additional cost provisions from the price escalation impact on ongoing projects.
In addition, the weakening of ringgit against the greenback had impacted the hedging of receivables for a project.
MMHE's revenue for the quarter rose 56 per cent year-on-year (YoY) to RM638.47 million versus RM409.23 million a year ago.
Its marine segment posted a lower revenue of RM68.2 million compared to RM89.1 million in the corresponding quarter last year due to lower number of vessels secured.
For the nine-month period (9M23), MMHE posted a net loss of RM490.37 million versus a net profit of RM40.63 million in the same period last year.
Conversely, its revenue rose 78.5 per cent YoY to RM2.19 billion compared to RM1.23 billion a year prior.
In a filing with Bursa Malaysia, the company said the recent Middle East conflict together with the Organisation of the Petroleum Exporting Countries + (OPEC+) continued commitment towards supply cuts could further tighten global oil supply and lead to higher oil prices amidst growing global demand.
This will likely increase capital expenditure spending beyond the pre pandemic level.
"In addition, the increasing significance of environmental, social and governance (ESG) will create multiple business opportunities for the group in the renewable energy space," stated MMHE. On project execution, it said the heavy engineering segment continues to face challenges in executing some of its ongoing projects within the original budgeted margins due to the impact of raw material price escalations and global supply chain disruption.
MMHE anticipates demand for energy shipment to rise particularly in far east countries and Europe in the upcoming winter."Therefore, demand for dry-docking activities is likely to be slower. "This could potentially lead to a decrease in market share, as vessel owners prepare for a surge in seaborne trade requirements for the remainder of the year."
It added that competition amongst shipyards is anticipated to remain stiff. The company noted it will continue to explore opportunities in both domestic and international markets with increased emphasis on decarbonisation and renewable energy.
"The group is also looking into ways to improve our contracting strategies with clients through alliance concept or cost-plus basis, where possible, to mitigate the risks of global inflation for future projects." Notwithstanding the major setbacks, the group remains committed to deliver all projects meeting clients' requirements."