350 deepsea1

HIGHLIGHTS


» Despite tough market conditions, Group’s revenue remained relatively consistent at US$282.2 million for 9M2015, representing a slight decrease of 1.3% y-o-y

» Fleet utilization increased to 81.5% for 3Q2015 from 61.9% for 1Q2015 and 74.0% for 2Q2015

» Group’s continuous efforts in cost reduction sees selling and administrative expenses fall US$6.7 million or 23.1% to US$22.4 million for 9M2015

» Shipyard segment recently secured two newbuilds for Indonesian cabotage market worth US$9.0 million

OTTO MARINE has posted US$282.2 million in revenue for 9M2015,  a 1.3% decrease mainly attributed to lower charter rates despite higher utilization in the subsea services segment.

In addition, the shipping and chartering segments experienced the effects of a reduced fleet size, partially offset by an increase in shipyard revenue.

Gross profit decreased 41.2% in 9M2015 to US$25.6 million with gross profit margin at 9.1%. The group worked on lower margin projects, and saw a decrease in revenue and increase in depreciation arising from the capitalized dry-docking costs in 2014.

Moreover, the Group’s vessel ownership increased to 34 vessels as at 30 September 2015 compared to 21 vessels a year earlier, it was able offset lower daily charter rates.

Thus, the Group’s gross profit margin for 3Q2015 remained relatively stable at 15.0% compared to 15.4% for 3Q2014.

Selling and administrative expenses were reduced by 23.1% to US$22.4 million and other expenses by 57.0% to US$1.8 million for 9M2015.

The former decreased due to the Group’s cost rationalization measures and the latter decreased as a result of the absence of foreign exchange losses.

However, finance costs increased from US$19.1 million in 9M2014 to US$27.8 million in 9M2015. This was mainly due to interest incurred on certain loan facilities drawn down after 1H2014 and the finance costs arising from held-for-sale liabilities.

320 Michael See"Overall, we have a comprehensive fleet which can support the entire oil and gas life cycle and we are one of the very few Asian operators with a wide range of vessel sizes, from small offshore vessels to higher end sophisticated large-sized Norwegian DNV-class vessels with the capability to operate in deeper waters. 

"This gives us access to markets such as Australia which has been a stable market for chartering in LNG projects, and access to markets in the North Sea. We hope to further develop our key partnerships to gain greater access to high growth markets and cabotage-protected areas to maintain our market position.”  -- Michael See (photo), Group CEO, Otto Marine.

As a result of the above factors, the Group reported a net loss attributable to shareholders of US$21.4 million for 9M2015.

But it continued to register positive operating cashflow (since FY2012). This increased 54.4% to S$89.8 million for 9M2015 with an EBITDA of approximately US$38.2 million.

While the Group has trimmed its fleet size to 50 Offshore Support Vessels (“OSVs”) globally, despite challenging market conditions, it has managed to steadily improve the level of its vessel utilization rate.

Furthermore, the Group operates a young fleet with an average age of 5 years compared to other Asian peers and Global peers with averages ages of 6 and 9 years respectively.

Previously, on 3 September 2015, the Group announced that it had entered into two long term charter contracts in respect of two 16,000bhp large AHTS vessels worth approximately US$25.2 million.

Overall, the Group maintains a strong offshore chartering order book of approximately US$281.0 million, as at 30 September 2015.

Additionally, the Group's shipyard business has secured two newbuilds for the Indonesian cabotage market worth approximately US$9.0 million.

OUTLOOK 

400batamOtto Marine's shipyard in Batam. NextInsight file photo.The outlook for the oil and gas sector remains bleak amidst an oversupply in the market and steep cuts in capital expenditure. 

However, the Group is focused on sustaining its vessel utilization by stepping up efforts to improve its order book whilst continuing its cost rationalization measures to improve overall competitiveness. 

Commenting on the Group’s performance for the quarter, Mr. Michael See, Group CEO, said: “The industry continues to prove challenging as the global oil glut is expected to take longer to clear. Despite this, we have continued to focus on areas that we can impact, to improve our competitiveness. We have deployed measures in marketing and operations to ensure Otto Marine’s optimal performance.

"Through cost rationalization, our selling and administrative expenses fell by 23.1% to US$22.4 million for 9M2015. As for our shipping and chartering segment, in view of the potential costs that idle vessels would incur, we have expended substantial efforts to secure new chartering orders and to improve vessel utilization.


"Concurrently, we decreased our fleet size from 60 as at 30 September 2014 to 50 vessels as at 30 September 2015 with ownership increase from 21 to 34 vessels.

"Increased vessel ownership counteracts lower daily rates from charterers to stabilize gross margin at approximately 15%. This strategy enables us to enjoy better returns, reducing our exposure to market fluctuations as we can return chartered-in vessels at contract expiration. Moreover, we are able to maintain young and technologically advanced vessels that are more competitive."


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