Jaya Holdings net plunges 99% to $1.2m
Hit by impairment and foreign exchange losses, Jaya Holdings' net profit for the full year ended June 30 plunged 99 per cent to just $1.2 million from FY2008's $149.8 million.
Restructuring: Jaya had to do a reconfiguration of its shipbuilding programme to moderate the pace of vessel construction and to cancel or defer certain projects
Despite a 14 per cent fall in revenue to $263.2 million, gross profit rose 17 per cent to $136.5 million as cost of sales dropped 34 per cent to $126.7 million.
But 'other expenses' shot up to $180.3 million from just $141,000 previously. One key factor was that impairment losses and provisions for associated costs recognised for the cancellation and deferral of less viable shipbuilding projects came up to $99.4 million. The weak economic climate caused oil and gas players to cut back on their exploration and production budgets. Jaya said it had to embark on a restructuring of its operational activities and financial arrangements, including a reconfiguration of its shipbuilding programme to moderate the pace of vessel construction and to cancel or defer certain projects.
The impairment losses and provisions for associated costs were borne by Jaya's shipbuilding division, which recorded a loss of $74.7 million for FY09.
At the group level, forex losses came up to $71.1 million due to the group entering into forex contracts to hedge its foreign currency- denominated costs relating to its shipbuilding programme, and contracted vessel purchases and commitments with third-party shipyards as part of its fleet renewal programme. The group also recorded more than $8 million in impairment of goodwill and stocks.
The shipbuilding division recorded 27 per cent lower revenue of $172.5 million. Sales from nine vessels under construction were recognised at an average rate of 45 per cent for FY09, which was lower than the average rate of 60 per cent for the 14 vessels under construction in FY08.
The group's chartering division was the only profit contributor with $76.5 million, after taking into account a forex loss of $32.7 million.
The division reported a 27 per cent rise in revenue to $90.1 million on the back of a higher average daily charter rate of $11,149 as compared to $8,068 in FY08. It achieved higher revenues despite the decrease in fleet size from 29 vessels a year ago to 24, due to a better fleet composition and higher charter rates for some of the vessels which were contracted earlier under more favourable market conditions.
The group continues to face a challenging and highly competitive operating environment, Jaya warned. The demand for offshore support vessels (OSVs) and the associated prices and charter rates of OSVs have softened in line with prevailing conditions in the offshore oil-and-gas industry. Meanwhile, the near-term industry outlook is poor as demand is not likely to improve while a large supply of new vessels is expected to come onstream in the next 12 months.
Apart from the tough market conditions ahead, Jaya has also previously warned of difficulties in its shipbuilding programme and uncertainties related to its capital structure. The group expects to sell and/or dispose of fewer vessels in the next 12 months as compared with each of the last three financial years.
In line with this, the group expects to have to expand its own charter fleet and deploy these vessels. The enlarged fleet will result in increased funding requirements for the group, Jaya warned.
'Market conditions have been extremely challenging for us during FY09 and we continue to see market softness in the short term,' said CEO Chan Mun Lye.
'We have, however, taken the necessary measures to ensure that our dual- pronged approach in shipbuilding and chartering of vessels dedicated to the offshore oil-and-gas sector remains viable for us in the long term. The ongoing restructuring of the group's operational activities and financial arrangements will ensure that the group will be in a stronger position when the global economic situation recovers,' he added.
Jaya shares closed one cent higher at 46.5 cents yesterday.
Restructuring: Jaya had to do a reconfiguration of its shipbuilding programme to moderate the pace of vessel construction and to cancel or defer certain projects
Despite a 14 per cent fall in revenue to $263.2 million, gross profit rose 17 per cent to $136.5 million as cost of sales dropped 34 per cent to $126.7 million.
But 'other expenses' shot up to $180.3 million from just $141,000 previously. One key factor was that impairment losses and provisions for associated costs recognised for the cancellation and deferral of less viable shipbuilding projects came up to $99.4 million. The weak economic climate caused oil and gas players to cut back on their exploration and production budgets. Jaya said it had to embark on a restructuring of its operational activities and financial arrangements, including a reconfiguration of its shipbuilding programme to moderate the pace of vessel construction and to cancel or defer certain projects.
The impairment losses and provisions for associated costs were borne by Jaya's shipbuilding division, which recorded a loss of $74.7 million for FY09.
At the group level, forex losses came up to $71.1 million due to the group entering into forex contracts to hedge its foreign currency- denominated costs relating to its shipbuilding programme, and contracted vessel purchases and commitments with third-party shipyards as part of its fleet renewal programme. The group also recorded more than $8 million in impairment of goodwill and stocks.
The shipbuilding division recorded 27 per cent lower revenue of $172.5 million. Sales from nine vessels under construction were recognised at an average rate of 45 per cent for FY09, which was lower than the average rate of 60 per cent for the 14 vessels under construction in FY08.
The group's chartering division was the only profit contributor with $76.5 million, after taking into account a forex loss of $32.7 million.
The division reported a 27 per cent rise in revenue to $90.1 million on the back of a higher average daily charter rate of $11,149 as compared to $8,068 in FY08. It achieved higher revenues despite the decrease in fleet size from 29 vessels a year ago to 24, due to a better fleet composition and higher charter rates for some of the vessels which were contracted earlier under more favourable market conditions.
The group continues to face a challenging and highly competitive operating environment, Jaya warned. The demand for offshore support vessels (OSVs) and the associated prices and charter rates of OSVs have softened in line with prevailing conditions in the offshore oil-and-gas industry. Meanwhile, the near-term industry outlook is poor as demand is not likely to improve while a large supply of new vessels is expected to come onstream in the next 12 months.
Apart from the tough market conditions ahead, Jaya has also previously warned of difficulties in its shipbuilding programme and uncertainties related to its capital structure. The group expects to sell and/or dispose of fewer vessels in the next 12 months as compared with each of the last three financial years.
In line with this, the group expects to have to expand its own charter fleet and deploy these vessels. The enlarged fleet will result in increased funding requirements for the group, Jaya warned.
'Market conditions have been extremely challenging for us during FY09 and we continue to see market softness in the short term,' said CEO Chan Mun Lye.
'We have, however, taken the necessary measures to ensure that our dual- pronged approach in shipbuilding and chartering of vessels dedicated to the offshore oil-and-gas sector remains viable for us in the long term. The ongoing restructuring of the group's operational activities and financial arrangements will ensure that the group will be in a stronger position when the global economic situation recovers,' he added.
Jaya shares closed one cent higher at 46.5 cents yesterday.
