SINGAPORE (Feb 13): Vallianz Holdings, the provider of offshore support vessels, reported a 35.4% fall in earnings of US$3.1 million ($4.4 million) for the three months ended 31 December 2016 (4Q16).
This brings the group’s earnings to US$15.6 million for the 12 months ended 31 December 2016 (FY16) which is 22.7% lower than a year ago.
Group revenue in 4Q16 and FY16 softened by 11.9% and 10.1% to US$41.4 million and US$209.1 million respectively, due mainly to lower contributions from its vessel management services.
Vallianz says this is in line with the group’s strategy to focus on its core vessel chartering and brokerage business which generated relatively stable revenue in FY16 compared to the year-ago period.
As a result, charter and brokerage services accounted for a higher 82% of group revenue in FY16 as compared to 64% in FY15.
Gross profit margin in 4Q16 narrowed to 26.7% compared to 30.5% in 4Q15. For FY16, the group’s gross profit margin also declined to 25.5% from 28.4% in FY15. This was due mainly to renewal of certain existing contracts at a lower average charter rate, which was cushioned by the group’s management of operating costs.
The group’s continuing efforts to rationalise its cost structure amid a slower market environment have also led to a substantial reduction in its administrative expenses for both 4Q16 and FY16.
Finance costs in 4Q16 and FY16 also shrank considerably compared to the corresponding periods last year.
These cost savings helped to partially buffer the negative impact arising from lower gross profit, reduction in other income, foreign exchange loss, and share of results of associate and joint ventures.
Said Ling Yong Wah, CEO of Vallianz, “Over the years, we strengthened our capabilities, customer relationships and order book to establish a sound and stable base for our Middle East operations. This has helped the Group to sustain a leading market position in Middle East despite rising competition, as well as partly mitigate the challenges faced in other regions where vessel charter rates are under greater pressure due to sluggish demand and intense industry competition. In addition, the Group has been implementing a cohesive strategy to streamline its business operations. To this end, we have closed non-core business units that will further lower our cost structure and sharpen our focus on our core vessel chartering operations.”
As part of its rightsizing exercise, the group has ceased operations of its shipyard in Singapore and the provision of crew management and travel management services to the offshore oil and gas industry at the end of 2016.
In its outlook, Vallianz says the operating environment for offshore support vessel (OSV) operators remains difficult as the industry continues to be afflicted by intense competition, downward pressure on charter rates and low vessel utilisation amid supply-demand imbalances in the OSV market.
As at Dec 31, the group had an outstanding chartering services order book valued at US$950.1 million in aggregate, comprising primarily long term charters which include 2-year extension options stretching up to 2025.
These charter contracts are mainly with a national oil company in the Middle East.
Vallianz closed at 2 cents on Friday.
