JAKARTA — Wintermar Offshore Marine (IDX:WINS) has reported 1Q2017 financial results. Revenue from WINS fleet falls 39% YOY, reflecting the lagged effect of depressed oil prices in 2016.
Overall Revenue including Chartering Division fell by 44% YOY to US$ 13.1 million compared to US$ 23.3million in 1Q2016. This was caused by the lagged effect of the near standstill in tendering activity experienced in the second half of 2016, which resulted in lower charter rates at the same time as the utilization rate dipped below 50%.
Although sentiment in the oil industry seems to have bottomed and tendering activity has picked up in 2017, the OSV sector lags the oil price by 6-9 months. The low first quarter result reflected the negative sentiment in the industry in the latter half of 2016 where few contracts were awarded.
The utilization rate of Owned Vessels fell to 49% in 1Q2017 from 57% in 1Q2016. High tier vessels saw a bigger dip in utilization as several of them completed contracts last year and there were no significant new contracts of work that began in 1Q2017.
Lower fuel, crewing and operations costs contributed to a 11% decline in Owned Vessel Direct Expenses to US$10.5 million, mainly from a 23% fall in crew costs, with 46% and 51% reductions in maintenance and fuel costs respectively.
At the Gross Profit level, Owned Vessel Division recorded a loss of US$ 1.05 million for 1Q2017 compared to a profit of US$ 3.6 million in 1Q2016. On a QOQ basis, there was a slight improvement in Owned Vessel performance compared to the loss of US$ 1.5 million in 4Q2016 as crewing costs continued to fall.
-Chartering and Other Revenues
The Chartering Division was also negatively affected by the severe downturn last year. Revenue and Gross profit from Chartering Division fell by 59% YOY and 39% YOY to US$ 2.9 million and US$ 0.6 million respectively.
Other Revenues were stable while Gross profit from this division rose 16% to US$ 0.2 million.
Indirect expenses fell by 4% to US$ 1.9 million as reductions in marketing, telecommunications and administration costs were offset by slightly higher salary and training expenses as well as professional fees paid.
An Operating loss of US$ 2.2 million was recorded for 1Q2017 compared to an Operating profit of US$ 2.6 million in 1Q2016.
-Other income and expense
Interest expenses fell by 8% YOY to US$ 2.1 million because of lower debt. Associates recorded a loss of US$ 0.3 million and there was an asset impairment of US$ 0.6 million from reclassifying vessels for sale at a potential loss.
Overall Total net other expenses declined by 19% to US$ 3 million YOY.
-EBITDA, Debt and Impairment
EBITDA for the first quarter 2017 amounted to US$ 4.8 million, a fall of 51% compared to the first quarter in the previous year, but slightly better than 4Q2016. The positive cash flow supported the continued payment of loan installments, enabling the Company to bring down the net gearing further to 49% from 50% at the end of FY2016.
Net interest bearing debt fell by US$ 6 million to US$ 111 million as at end March 2017, a reduction of 5.1% from year end 2016.
In line with management strategy to sell older vessels, several vessels were reclassified as held for sale, as reflected in the asset impairment value of US$ 0.6 million booked in 1Q2017.
-Net loss attributable to Shareholders
Net loss attributable to Shareholders for the period 1Q2017 was US$ 4 million, compared to a net loss of US$ 1.4 million in 1Q2016.
-Contracts on hand are finally picking up
Although the financial results for 1Q2017 continue to be weak, the marketing activity has been trending up steadily for the first few months of 2017.
As a leading indicator, the contracts on hand which declined steadily last year due to a lack of activity have started to rise again with the award of new contracts of work in the past few weeks.
Since the end of December 2016, there has been higher optimism that oil prices are settling into a more stable trading range. There is increased activity in South East Asia with a number of contracts awarded over the past few months.
Despite the higher activity, there is still oversupply in the OSV industry, which has caused charter rates to fall even further in the latest rounds of tenders.
There is new drilling activity in South East Asia, as indicated by some new tenders for drilling rigs in Vietnam, Indonesia, Myanmar and Malaysia so far this year. We are optimistic that business conditions are improving, but because of the price competition, we expect it will be several months before this is reflected in better financials for the Offshore support sector.
Cost control continues to be a key focus, with emphasis on improving the efficiency of fuel and operations. At the same time marketing efforts have been extended geographically as well as expanding the client base. We will seek to build up other income through building new client relationships in new industries.
Cash flow will be enhanced through speeding up asset sales of older fleet. With the reasonably low gearing of 46%, the Company is well positioned to weather the cycle.
-Planned Corporate Action
Wintermar has announced a plan to issue up to 400 million new shares through a placement without pre-emptive rights, which will require approval by the General Meeting of Shareholders (GMS) on 18th May 2017. If approved at the GMS, the Company has a two year window to issue such shares.
The approval of the shares issuance will allow the Company the flexibility to raise funds as and when required, and provide funds to reduce debt, strengthen equity, increase working capital and fund any possible business opportunities that may present themselves in the coming 24 month period.