Deleum reports 8.6 % hike in pre-tax profit for FY2017

Deleum Berhad, a provider of diverse range of supporting specialised products and services to the oil and gas industry, reported a pre-tax profit of RM54.0 million for the financial year ended December 31, 2017 (FY2017), an increase of 8.6% from the corresponding year.

The Group’s revenue, however, fell 12.3% to RM534.1 million compared to the corresponding year amidst challenging trading conditions particularly in the Power and Machinery and Oilfield Services segments. This was mitigated by the higher revenue from the Integrated Corrosion Solution segment.

The Power and Machinery (P&M) segment saw a RM3.2million increase in pre-tax profit to RM39.1million despite lower segmental revenue. This was attributed, in part, to better sales composition and improved margins from repair and maintenance of valves, flow regulators and ancillary services.

Pre-tax profit for the Oilfield Services (OS) segment saw an increase of 16% to RM14.5 million compared to RM12.5 million in FY2016. This was due to improved margins from slickline activities, recovery of oilfield chemical activities and reduction in finance costs.

While the Integrated Corrosion Solution (ICS) segment recorded higher revenue of RM49.7 million, an increase of RM6.1 million compared with FY2016, profit before tax dropped 0.7% due to downward pressure on margins and higher cost to serve, much of which were attributable to upscaling capacity to support the delivery of the MCM contract.

In line with Deleum’s dividend policy, the Group has declared a second interim single tier dividend of 3.25 sen per ordinary share in announcing its financial results for FY2017, payable to shareholders on 28 March 2018. Combined with its first interim single tier dividend of 1.00 sen per ordinary share which was paid out on 26 September 2017, this will record a total dividend of 4.25 sen per ordinary share for FY2017.

The Group noted whilst revenue for FY2017 was down cumulatively from RM608.7 million to RM534.1 million, profit for the financial year was up to RM39.3 million from RM32.8 million on the back of a favourable sales mix, operational efficiencies and cost management.

However, the Group remain cautious as the volatility of the Ringgit will continue to have noticeable effect on the Group’s financial assets and liabilities as mainly trade receivables and payables are denominated in USD.

Looking ahead to 2018, on a segment basis, Deleum expects its Power and Machinery segment’s financial performance to further soften due to lower gas turbine after sales and service activity levels. This, however, will be cushioned by higher revenue from exchange engines, retrofit and rotary projects, and MRO goods and services.

For its Oilfield Services, the continuity of contracts and new contracts secured with various operators would be critical to ensure the sustainability of the segment in the light of the expiration of various contracts in 2018 and 2019.

The Integrated Corrosion Solution segment kicked off 2018 on a positive note with the securing of the MCM contract. The segment’s revenue will come substantially from work orders flowing from it.

For 2018, Deleum sees oil prices likely to trade in the USD60-USD70 range with downside risks remain elevated as the market continues to rebalance itself and the observed inverse relationship between oil prices and the dollar. The Group will continue with its existing strategies focusing on its core businesses, operational efficiencies and managing cash flows.

(EOG)

Subscribe to Get the Latest Updates from EOG  Please click here