Group revenue for 1Q18 was RM2,020.8 mill, compared with RM2,984.9 mill in 1Q17.
This decrease was mainly down to the offshore segment, as 1Q17’s revenue included recognition of one time gain for Gumusut-Kakap Semi-Floating Production System (L) Limited ("GKL") from variation works following favourable adjudication decision.
Lower freight rates in the petroleum segment and lower number of operating vessels and charter rate from contract renewal in the LNG segments further dampened the Group revenue in the current quarter. Furthermore, Heavy engineering segment also recorded lower revenue mainly due to completion of projects, whilst new secured projects are still at their early stages.
Group operating profit for the period of RM383.4 mill was lower than the corresponding quarter's operating profit of RM681.3 mill as petroleum and heavy engineering segments both recorded operating losses in 1Q18 caused by lower revenue as outlined above.
LNG segment recorded lower operating profit compared to corresponding quarter as this year included recognition of compensation for early termination of timecharter contract for one vessel.
Group profit before tax of RM319.2 mill was lower than the corresponding quarter's profit before tax of RM696.6 mill, as there was a recognition of gain on disposal of a vessel in the corresponding quarter and lower share of profits from joint ventures in current quarter.
MISC's President/Group CEO, Yee Yang Chien, said: "MISC Group will strive to sustain our financial performance and continue to focus on generating a target level of operating cash flow that will fund our pipeline of growth projects in the coming years. 2018 is expected to be another difficult year, nonetheless, the recovery of oil price will benefit the offshore sector the most and we are positive about the opportunities available on the upstream deepwater projects locally and globally.
“For LNG Shipping, our present portfolio of long term charters will support the steady financial performance of this segment. Overall, we remain optimistic about long-term prospects and our focus remains on ensuring the successful execution of our five-year business strategy towards attaining a sustainable level of secured profits by FY2020," he said.
In 1Q18, petroleum tanker earnings were considerably weaker than previous years, despite the winter season. Lower tonnage demand on the back of OPEC-led production cuts, as well as tonnage oversupply depressed the market considerably. The petroleum shipping segment is expected to face a challenging 2018 and the year’s performance is expected to be weaker than 2017.
On a positive note, vessels scrapped have been on the rise in 1Q18, as the number of tankers recycled outnumbered new vessel deliveries. The trend in scrapping is expected to continue, supported by good steel prices and a weak earnings environment encouraging owners to retire older tonnages. This supports a recovery in freight rates in the medium to longer term, MISC said.