Wintermar?s profit down 22%, expects recovery next year

By Romel S. Gurky

IDX-listed PT Wintermar Offshore Marine Tbk said that net profit attributable to shareholders in 2014 fell by 22 percent to US$21.7 million compared to the previous year as revenue from chartering division declined and cost increased.

The company, which is engaged in providing offshore supporting transportation services for oil and gas firms, said in a statement Wednesday, that revenues from the owned vessel segment rose by 3 percent to US$110.9 million, reflecting an increase in the company?s fleet.

During the year, the company took delivery of 3 new vessels, 1 unit Platform Supply Vessel, 1 unit of 8000 BHP Anchor Handling Tug Supply and 1 unit Utility Vessel. Through the acquisition of PT Fast Offshore Indonesia Wintermar also added 4 units of Fast Multipurpose Supply Vessels (FMPV) to its fleet, thus widening its fleet capabilities.

?Because of the delay in government approvals for oil and gas projects over the course of 2014 however, we saw a significant slowdown in the second half of the year. The lower utilization of high tier vessels in the second half resulted in a decline in margins from owned vessels to 45.1 percent compared with 51.9 percent in FY2013, and gross profit from owned vessels fell by 11 percent to $49.9 million,? the company said in a statement.

Wintermar said chartering division revenues fell by 30 percent year-on-year (YOY) to $54.6 million while higher gross margins underpinned gross profit from chartering, which rose by 11 percent to $5.8 million. The reduction in chartering revenues reflected the general decline in demand experienced in Indonesia during the second half of the year. Other revenue rose by 16 percent from one-off services provided to clients.

Under direct expenses, a significant increase was noted in fuel bunker costs which doubled to $4.8million as a result of having more vessels idle.

Operating profit for the year was $45.1 million, down 11 percent from the previous year.

Wintermar said net other income and expenses rose by 19 percent to $11.7 million, mainly from interest expenses and finance charges which rose 5 percent to $11.8million, while income from associate fell 74 percent.

Total Assets as at 31 Dec 2014 increased to $501million, from $478 million a year ago, reflecting the purchase of 3 new vessels. Net gearing was lower at 67 percent as we raised new equity in 2014 through: i) The conversion of IFC?s convertible loan into 190million shares, and ii) the placement in May 2014 of about 116million shares on a non pre-emptive basis.

Wintermar said the sudden sharp drop in the oil price since 4Q2014 and has had a significant negative impact on the oil and gas industry globally.

Since early 2015, major oil companies worldwide have been cutting capital expenditure. Until oil prices find a stable level, most exploration works are being postponed and several rig contracts are being terminated. Exploration work which we had expected to start in Indonesia has been delayed because of the bleak and uncertain outlook on oil prices.

?We continue to market our vessels in the region in 2015 but since the industry globally is facing severe cutbacks in capital expenditure, we expect price pressures amidst strong competition for work. Our mid and low tier vessels are able to serve the production phase and are less affected. However we are less optimistic on the high tier vessels and expect a fall in utilization rates for 2015. Because the higher tier vessels had contributed to higher margins, this will impact our margins negatively in 2015 and we expect a drop in 2015 earnings if oil prices continue to fluctuate widely,? Wintermar explains.

?Our strategy for facing these very challenging times in the short term has been to continue seeking new markets for our vessels while also implementing cost reduction measures,? it added.

The company said it has reduced planned 2015 capital expenditure by 40 percent to $30million, funded 70 percent by bank loans and 30 percent equity, and will be postponing two out of three deliveries to the second half of the year when it expects more visibility on the outlook. At the same time, the company continues to work towards increased efficiency in the management of our vessels.

?In 2016 we expect higher activity in Indonesia stemming from some development projects in Eastern Indonesia where production is on the horizon - in Papua, the Arafura sea and in the Makassar Strait where there are already proven reserves and a production deadline,? Wintermar said.

?As these projects have already incurred significant development expenses, we are optimistic that they will continue as planned,? it added.

In the coming years we would expect measures to attract investments into oil and gas exploration as well as the maritime sectors, it said.

?Therefore the outlook for 2016 and beyond looks markedly better because of domestic factors and we believe that as Indonesian flagged shipowners we will have a better competitive environment arising from the domestic cabotage regulation when Indonesian activity starts to pick up again. In the meantime we are bracing ourselves for a challenging year ahead,? Wintermar said.

The company added that total contracts on hand as at end February 2015 amount to US$142 million.

Editing by Reiner Simanjuntak