The decrease in revenue was mainly due to lower revenue in two business segments - Heavy Engineering and LNG.
Group operating profit of RM666.6 mill was also lower than the corresponding quarter's profit of RM1,028.1 mill, mainly due to lower revenue and higher depreciation by RM118.7 mill, following the change in estimated useful life of LNG and products tankers beginning January, 2016.
Heavy Engineering recorded an operating profit of RM18.7 mill in 4Q16, compared with RM50.4 mill in the corresponding quarter following the decrease in its revenue. Meanwhile, Offshore recorded higher operating profit from construction gain recognition of a finance lease asset in the current quarter and higher contribution from GKL following completion of the equity buyback in May, 2016.
Group profit before tax of RM504.5 mill was lower than the corresponding quarter’s profit of RM763.1 mill, driven by lower operating profit from LNG, Petroleum and Heavy Engineering business segments and lower share of profit from joint ventures in 4Q16. However, the Group also recognised a gain on disposal of a subsidiary, MISC Integrated Logistics (MILS) amounting to RM73.6 mill in the current quarter.
Revenue for the full year of RM9,597.2 mill was 12% lower than the corresponding 2015 revenue of RM10,908.4 mill. The decrease was mainly due to fewer and lower backlog and order intake in Heavy Engineering; as well as lower revenue from the LNG business arising from the disposal of two vessels and lower rates earned on new contracts in LNG business. Meanwhile, consolidation of GKL’s results beginning May 2016, contributed to an increase in Offshore revenue for 2016.
Operating profit for the year of RM2,453.2 mill was 11.8% lower than the corresponding year’s profit of RM2,782.6 mill, mainly due to lower revenue and higher depreciation by RM450.2 mill for 2016, following the change in estimated useful life of LNG and Petroleum vessels in January, 2016. However, the Group also recognised compensation for early termination of timecharter contracts for two LNGCs and reversal of provision for a legal suit in 2016.
Profit before tax for 2016 of RM2,814 mill was 9.6% higher than the 2015 profit of RM2,566.9 mill, mainly due to the recognition of gains on acquisition of subsidiaries and disposal of a subsidiary in 2016. However, the Group also recorded provision for charter hire losses, on container vessels that remained in the Group following the Group’s exit from the Liner Business in 2011, lower share of profit from joint ventures and higher finance costs in the year.
The Petroleum shipping segment’s performance will come under pressure in 2017, with high fleet growth and potentially lower tonne/mile demand, as a result of reduced OPEC oil production post January, 2017’s quota restriction. However, the impact from the OPEC cut may be offset by higher production elsewhere and shipowners are hopeful that the enforcement of the ballast water treatment systems convention from September, 2017 will reduce vessel supply through accelerated vessel scrapping.
MISC’s President/Group CEO, Yee Yang Chien, said: “The year 2016 saw the global shipping industry undergoing another volatile year where businesses across the oil & gas supply chain suffered under very difficult market conditions.
“Despite the prevailing challenges in 2016, MISC once again proved its resilience by turning in commendable financial and operational performances. We expect no less than another challenging year ahead. However, we still see growth opportunities and we believe we have the resources to pursue these possibilities.
“Our priorities remain unchanged and the future growth of MISC will be guided by MISC2020: our five-year business strategy towards attaining a sustainable level of secured profits by FY2020,” he concluded.