Impairments see Vallianz post first quarter lossCompany News // May 23, 2017
Vallianz Holdings Limited has reported its financial results for the 15 months ended 31 March 2017 (FY2017).
The group recorded an operating profit before tax of US$20.3 million on revenue of US$247.8 million in FY2017. Around 84% of the group’s revenue was generated by its vessel chartering and brokerage business which is buoyed primarily by long-term charter contracts in the Middle East. This contribution was higher compared to 64% for the 12 months ended 31 December 2015 (FY2015), which is in line with the group’s strategy to focus on its core vessel chartering and brokerage business. Correspondingly, vessel management services accounted for a lower 15% of Group revenue in FY2017.
Gross profit margin in FY2017 was slightly softer at 25.2% compared to 27.9% in FY2015. This was due mainly to the renewal of certain existing contracts at a lower average charter rate (as announced on 20 July 2015), which was partially cushioned by the group’s proactive management of operating costs.
As a result of the business slowdown in the offshore oil and gas industry, the group had to record non-cash net impairment expenses totaling US$214.6 million, including impairment expenses of US$22.3 million attributable to non-controlling interests, for certain of its assets in FY2017. These exceptional expenses caused the group to slip into the red in FY2017 with a net loss of US$158.4 million.
Excluding the exceptional expenses, the group’s business operations remained profitable in FY2017 despite the tough operating environment in the offshore support vessels sector
Ling Yong Wah, CEO of Vallianz, said: "The industry conditions continue to be extremely challenging amid intense competition in the offshore support vessel market. Although sluggish demand has placed significant pressure on vessel utilisation and charter rates in most markets, Vallianz’s vessel chartering business remains operationally profitable. This is because most of our vessel charters are long term in nature and based primarily in the Middle East region where there are sustained oil production activities.
"Together with our strategic shareholder and partner Rawabi Holding, we have been focusing our efforts on strengthening customer relationships to sustain our leading market position in Middle East. Since the beginning of 2017, the froup has commenced charters for five new vessels which are expected to contribute to our revenue in the new financial year ending 31 March 2018.”
As at 31 March 2017, the group had an outstanding chartering services order book valued at approximately US$1.03 billion in aggregate, comprising primarily long term charters which include two-year extension options stretching up to 2025. These charter contracts are mainly with a national oil company in the Middle East.
During the current industry slowdown, the group executed initiatives to streamline its cost structure and operations to better align itself to the present operating environment. It said that these initiatives will it to concentrate its resources on the core vessel chartering operations.