Malaysian Bulk Carriers Bhd (Maybulk), which operates the country’s largest fleet of dry bulk vessels used for international shipping, has issued a profit warning regarding its performance last year.
According to the bulk commodity shipper, the company expected to record “a substantial loss” for the fourth quarter (Q4) ended Dec 31, 2015, and for the 2015 financial year (FY15).
This projected loss - based on the preliminary assessments and without an auditor’s review - was due mainly to a provision for onerous contracts (contracts in which the total cost to fulfill them exceeds whatever economic benefit to be received) and a provision for impairment of investment in PACC Offshore Services Holdings Ltd (POSH), a 21.23%-owned associate involved in providing offshore marine support services.
Maybulk says the dry bulk market remains weak and it is uncertain when it will recover. The 2013 Reuters file photo shows a ship loaded with soybeans at Santos port in Santos, Brazil.
On the first provision, Maybulk noted that the dry bulk market continued to be weak and it was uncertain when the market would recover.
“The group has reviewed its non-cancellable operating lease contracts for the chartered-in vessels and based on a preliminary assessment, the charter-in costs are higher than the current and likely market rates. Hence a provision for onerous contracts has to be made,” it explained.
As for the provision related to its investment in POSH, the company said the current depressed state of crude oil prices had adversely impacted the global offshore marine industry in which POSH operates in.
Maybulk said: “The group carried out a preliminary assessment of its investment in POSH and is of the view that the fair value of the investment in POSH is likely to be lower than the carrying value and an impairment loss provision has to be made.
“While the amount of the impairment is yet to be determined, it is expected that this will have a significant adverse impact on the financial results of the Group for 4Q2015 and FY2015.”
Maybulk had invested S$82.43mil (RM240.15mil) in POSH in 2014 in order to maintain its 21.23% stake in the Singapore-listed company in conjunction with POSH’s initial public offering exercise.
Maybulk, which is 48.46% owned by Kuok Group members Kuok (Singapore) Ltd and PPB Group Bhd, and 18.39% owned by Minister of Finance Inc, said this notice to shareholders and potential investors was based on the group’s preliminary assessments. It had carried out these assessments due to the development of the market situations in which the group and its associate operate.
These assessments, it continued, have not been reviewed or audited by external auditors.
“Details of the group’s financial performance for Q4 2015 and FY15 will be disclosed when the company announces its unaudited consolidated financial results for the relevant periods. Shareholders and investors are advised to exercise caution when dealing in the shares of the company,” said Maybulk.
For the first nine months of last year, Maybulk reported an unaudited net loss of RM58.07m compared with a net profit of RM33.94m in the previous year’s corresponding period.