XMH’s new facility in Tuas houses all its business segments and brings functions such as the testing of engine propulsion system in-house.  (NextInsight file photo) COMPANIES exposed to the oil & gas sector are making use of the slowdown to consolidate operations and strengthen relationships with customers. “Our contracts give us the right to forfeit all our customer deposits. But if we did that, orders won’t come to us when the sector recovers.” – Elvin Tan Chairman and MD (NextInsight file photo) One example is XMH Holdings, a diesel engine, propulsion and power generating solutions provider in the marine and industrial sectors. The Group recently relocated to its new 7-storey HQ in Tuas, where it intends to consolidate its operations. Its 1QFY2017 revenue decreased 18.3% year-on-year to S$19.4 million as both "project" and "distribution" business segments were affected by poor market sentiment. Gross profit margin fell by 6.8 percentage points to 19.9% due to intense competition. Despite this, EBITDA improved 27.6% to S$2.1 million, with EBITDA margin improving to 10.7% for 1Q2017 from 6.8% for 1Q2016. Net profit fell 73.1% to S$191,000. For more info on its financial results, refer to its media release here. “If we go according to contractual terms, we have the right to forfeit all our customer deposits. But if we did that, orders won’t come to us when the sector recovers. “At the end of the day, our relationship with the customer is more important than the contract,” said XMH Chairman and Managing Director Elvin Tan at a recent analyst briefing.

The Group has a new CFO, Mr Tan Leong Kim, who was Tat Hong Holdings’ former CFO. He was appointed as XMH’s CFO on 11 July 2016 and replaces Ms Jessie Koh, the former Finance Director who resigned. 

“We are exploring new revenue streams and trying to secure new customers in emerging markets,” said the new CFO, who was also present at the briefing.

“With all our business segments housed together in one building, we are able to have greater collaboration when pushing out our products.

“We save on rental, centralized purchases, as well as the management of treasury and other finance functions,” he added.

Below is an excerpt of the questions raised at the briefing and the replies provided by the Chairman and by the new CFO.

Q: How is the progress for the sales of your former Sungei Kadut office building?

JTC has already approved the transaction. We are selling our Sungei Kadut premises for S$2 million.

Q: What is the leasing status of your current office premise?

We have 3 tenants and third party rental income of more than S$100,000 per year. JTC allows us to lease no more than 30% of our gross floor area.

Q: How is the Indonesian shipping market?

Charter rates are still low and many vessels are still idle. Indonesian banks are unwilling to extend loans to vessel owners for capital expenditure as charter rates are not high enough to support loan instalment payments for buying new equipment.

The only business we see comes from a small volume of activity from state-owned oil majors such as Pertamina.

Q: How is the progress of your marinisation programme (conversion of industrial engines for marine vessel use)?

Marinised engines are attractive to the customer as they will be more cost effective than brand new ones. We have been talking for the past 6 months to prospective customers from another market segment so as not to cannibalise our existing market.

It takes time to build up a customer base for a new business segment.