Vallianz sees steep fall in profitsCompany News // November 15, 2016
Vallianz Holdings Limited says it continues to deliver a profitable performance despite the protracted downturn in the global offshore marine industry.
For the three months ended 30 September 2016 the group reported a net profit of US$3.0 million on revenue of US$54.8 million. Together with the profits generated in the first two quarters of 2016, the group posted a net profit of US$12.5 million for the nine months ended 30 September 2016.
At the top line, the group registered revenue declines of 8.4 per cent to US$54.8 million in 3Q2016 and 9.6 per cent to US$167.76 million in 9M2015. The decreases were due mainly to lower contributions from its vessel management services which is in line with the Group’s strategy to focus on expanding its core vessel chartering and brokerage business.
With the commencement of new charter contracts this year, the group recorded relatively stable revenue for its charter and brokerage services in 9M2016. Its charter and brokerage services accounted for a higher 70 per cent of group revenue in 9M2016 as compared to 64 per cent in 9M2015.
At the bottom line, the group’s net profits in 3Q2016 and 9M2016 were down by 42.5 per cent and 18.7 per cent respectively, which was mainly attributable to softer gross profit margins. This was the result of slower demand for offshore support vessels and intense industry competition in regions other than the Middle East.
To buffer the impact on its profitability and adapt to the current market environment, the group has been focusing on optimising its cost structure. This has enabled it to benefit from substantial reductions in its aggregate administrative expenses and finance costs in 3Q2016 and 9M2016.
Ling Yong Wah, CEO of Vallianz, said: "Notwithstanding the difficult business environment, the group has consistently generated profits for three consecutive quarters this year. To sustain the group’s competitiveness and cement its market position as a leading offshore support vessel provider to one of the largest national oil companies in the Middle East, we will continue to focus on strengthening our core capabilities to deliver operational excellence and value to our customers.
"Although business conditions in the global offshore oil and gas industry are likely to remain depressed and competition in the Middle East has been increasing, there are still business opportunities for the group in this region due to continued spending on oil and gas production activities by national oil companies.”
As part of its business expansion plans, Vallianz and its controlling shareholder and strategic business partner Rawabi Holding Company Limited will leverage the group’s established market position in the Middle East to strengthen existing customer relationships, and broaden its presence to other target markets in the region. Rawabi owns an 18.7 per cent equity stake in Vallianz and is its strategic partner in the Middle East through Rawabi Vallianz Offshore Services Limited.
As at 30 September 2016, the group had an outstanding chartering services order book valued at approximately US$1.0 billion in aggregate, comprising primarily long term charters with options to extend up to 2025. These charter contracts are mainly with a national oil company in the Middle East.
On 3 November 2016, the group announced that it will be redeeming in full the S$60 million fixed rate Notes due to mature on 22 November 2016. The redemption of the Notes will be funded by internally-generated funds as well as advances from Rawabi.