Gross Margins at 45.1% Reflecting Lower Utilization Resulting from Project Delays
AKARTA, Mar 11, 2015 - (ACN Newswire) - Wintermar Offshore Marine (IDX:WINS) has announced FY 2014 owned vessel revenue rose 3% on new fleet additions, with gross margins at 45.1% reflecting lower utilization resulting from project delays.
Revenues from the Owned Vessel segment rose by 3% to US$110.9 million, reflecting an increase in our fleet. During the year we 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 we also added 4 units of Fast Multipurpose Supply Vessels (FMPV) to our fleet, thus widening our 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% compared with 51.9% in FY2013, and gross profit from Owned vessels fell by 11% to US$49.9 million.
Chartering Division revenues fell by 30% YOY to US$54.6 million while higher gross margins underpinned gross profit from chartering, which rose by 11% to US$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% from one-off services provided to clients.
Direct and Indirect Expenses
Under direct expenses, a significant increase was noted in fuel bunker costs which doubled to US$4.8million as a result of having more vessels idle. While vessels were in between contracts we also did maintenance and upgrading works which resulted in higher fleet maintenance costs. Indirect expenses rose by 12%, largely contributed by higher salary expenses resulting from building up our in house shore team.
Operating profit for the year was US$45.1 million, down 11% from the previous year.
Other Income and expenses
Net other income and expenses rose by 19% to US$11.7 million, mainly from interest expenses and finance charges which rose 5% to US$11.8million, while income from associate fell 74%.
Net Income and EBITDA
After tax and minorities, the income attributable to shareholders was US$21.7 million for FY2014, reflecting a 22% reduction from the previous year.
Assets and Gearing
Total Assets as at 31 Dec 2014 increased to US$ 501million, from US$478 million a year ago, reflecting the purchase of 3 new vessels. Net gearing was lower at 67% as we raised new equity in 2014 through: i) The conversion of IFC's convertible loan into 190 million shares, and ii) the placement in May 2014 of about 116 million shares on a non pre-emptive basis.
The 4th Quarter 2014 saw higher utilization rates for our fleet as compared to 3rd Quarter 2014. This was because our marketing efforts in the region bore fruit as we were able to secure work in Myanmar and Vietnam for our larger vessels. However, the margins on these contracts are lower than in Indonesia as we don?t have the benefit of the Indonesian flag and have higher agency costs overseas.
The domestic market was subdued in 2014 because of the delay in regulatory approvals for some projects, which resulted in one large international oil company having to terminate its drilling program after not receiving approvals for the continuation of their program following the completion of only the initial phase. With the new government installed only in late 2014, we do not expect a significant change in the first half of 2015.
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.
In the longer term however, the sharp cutbacks in exploration and production spending worldwide will present an opportunity for better times ahead in the oil industry. Production cuts this year will likely cause an upturn in oil prices a couple of years down the road, while permanent cold-stacking of older rigs and OSVs will reduce global oversupply, and oil companies are able to reduce their overall costs of production by recontracting rigs at much reduced rates, making some projects still viable at lower oil prices.
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. We have reduced our planned 2015 capital expenditure by 40% to US$30million, funded 70% by bank loans and 30% equity, and will be postponing two out of three deliveries to the second half of the year when we expect more visibility on the outlook. At the same time, we continue to work towards increased efficiency in the management of our vessels.
Good Opportunities in the Longer Term
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. As these projects have already incurred significant development expenses, we are optimistic that they will continue as planned.
Indonesia is strongly committed to increasing the oil and gas lifting in the country and cannot afford any delays because of the sharply declining profile of most of the country's older oilfields. The oil and gas industry is of strategic importance to Indonesia's future and the falling oil production has to be addressed imminently to protect Indonesia's energy security in the future. The country has significant reserves of natural gas and we are optimistic since the new government has made it a priority to increase the country's oil and gas production. In the coming years we would expect measures to attract investments into oil and gas exploration as well as the maritime sectors.
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.
Our total contracts on hand as at end February 2015 amount to US$142 million.
About PT Wintermar Offshore Marine
PT Wintermar Offshore Marine Tbk (IDX:WINS) is an Indonesian offshore marine services company that owns a fleet of 80 vessels ready to handle a large variety of marine support services required in upstream oil and gas exploration and production activities including transporting crew, equipment and supplies, as well as providing services such as anchor handling, towing, and mooring of offshore rigs. Our young and growing fleet, comprising a wide variety of vessel types, enables us to offer innovative vessel and logistics solutions to serve our client base of multinational oil and gas companies. In 2011, WINS became the first shipping company in Indonesia to be certified with Integrated Management System by Lloyds Register Quality Assurance, comprising ISO 9001:2008 (Quality), ISO14001:2004 (Environment) and OHSAS 18001:2007 (Occupational Health and Safety). For more information, please visit www.wintermar.com.
Ms Pek Swan Layanto Investor Relations PT Wintermar Offshore Marine Tbk Tel: +62 21 530 5201 Ext 401 Email: [email protected]