MMHE swings into a net loss of RM484mil in FY2023 on cost provisions

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd's (MMHE) has posted a net loss of RM484.19 million in the financial year ended Dec 31, 2023 as compared to a net profit of RM67.77 million in financial year 2022.

Revenue however rose to RM3.31 billion from RM1.65 billion in the previous year.

In a filing to Bursa Malaysia Securities Bhd, MMHE said the year under review was impacted by additional cost provisions recognised for ongoing heavy engineering projects, while the weakening of the ringgit against the US dollar negatively impacted the hedging of receivables for a heavy engineering project.

In the fourth quarter ended Dec 31, 2023, MMHE's net profit fell to RM6.18 million from RM27.14 million in the same quarter in 2022, representing an earnings per share of 0.4 sen as compared to 1.7 sen.

The group's revenue soared to RM1.2 billion from RM424 million in the said quarter, on the back of higher contributions from the heavy engineering segment.

MMHE said despite the higher revenue, the heavy engineering segment's operating profit in the fourth quarter was nearly halved year-on-year to RM7.4 million, as a result from the partial recognition of cost recovery claims negated by the additional cost provisions for an ongoing project during the quarter.

The marine segment also posted significantly lower operating profit of RM2 million as compared to RM22 million in the same quarter in 2022 due to lower margins amid stiff competition.

MMHE said it will continue to explore opportunities in both the domestic and international markets.

With the recent award of the novel offshore windfarm project, the group said it will focus on pursuing renewable energy projects and those in the decarbonisation space.

"In consideration of the global supply chain issues, the group has taken steps to improve its contracting strategies with clients where possible through alliance concept, reimbursable or cost-plus basis to mitigate those issues," it added.

On its outlook, the group said the heavy engineering segment continues to face challenges in executing ongoing projects within the original budget due to the rising costs of raw materials and global supply chain disruptions.

"These projects, awarded on a lump sum engineering, procurement, construction, installation, and commissioning basis by clients a few years ago, face ongoing efforts to recover from the inflationary and schedule impacts. The group will continue pursuing the recovery of these impacts from clients," it said.

For the marine segment, the group expects competition among peers to remain stiff, given the presence of new liquefied natural gas carrier (LNGC)-repair yards in China and other neighbouring countries.

Despite that, the group is continuing with the efforts in securing more dry-docking opportunities with major LNG players, as well as conversion projects, given the uptrending oil prices and stabilised oil and gas market.

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