MISC Group Financial Results for the Second Quarter of FY2023

The Group’s revenue, operating profit and profit before tax in the current period were all higher compared to the corresponding period based on the reasons as stipulated above.

The Group recorded cash flows generated from operating activities of RM3,276.6 million for the period ended 30June 2023 which was higher by RM2,192.4 million or more than 100% compared to RM1,084.2 million in the corresponding period, mainly due to higher operating performance in the current period and receipt of charter hire prepayment for two FSUs. Additionally, the Group recorded lower payments for cost relating to turnkey activities for the conversion of a FPSO amounting to RM868.4 million in the current period compared to payments ofRM1,288.4 million in the corresponding period. Excluding the payments for the above turnkey activities, the Group’s adjusted net cash generated from operating activities of RM4,145.0 million was higher by RM1,772.4 million or 74.7% compared to RM2,372.6 million in the corresponding period.

Moving Forward

In the LNG shipping market for the second quarter of 2023, spot rates bottomed-out in May with slight recovery inJune on the back of improved chartering activity, mainly in the Atlantic basin partly due to the production setbacks in US and other producing locations. In the near term, prospects remain positive due to the rebounding of LNG demand prompted by lower prices, restocking for winter requirements and depletion of inventories in the summer given frequent heat waves. Premised on this, the Gas Assets and Solutions segment will continue to pursue available growth opportunities while its operating income continues to remain solid, supported by its current portfolio of long-term charters.

Meanwhile, the petroleum shipping market rates for VLCCs in the second quarter of 2023 remained firm while that of mid-sized tankers have softened in June 2023 due to lower activities in the UK Coast, Mediterranean and Black Sea region. Nevertheless, the overall tanker market outlook remains positive due to new trade patterns supporting tonne-mile demand, despite the recent short term production curbs by OPEC+. Based on the current environment, the Petroleum & Product Shipping segment has been continuing to improve the quality of its income and balance sheet through its niche shuttle tanker business and rejuvenation of its fleet with dual-fueled tankers.

The global upstream capex spending is forecasted to remain strong in 2023 encouraged by high oil prices despite mixed macroeconomic signals. Demand for FPSOs is expected to stay firm with anticipated increase in project awards over the next few years, particularly in the South American region. For the time being, the Offshore Business segment will remain focused on executing the project in hand and undertake mitigation measures to minimise cost and schedule pressures, while selectively pursuing new opportunities in the market. The existing portfolio of long-term contracts will continue to support the segment’s financial performance.

For the Marine & Heavy Engineering segment, continuing high oil prices are expected to support increased oil & gas capex, and increasing significance of environmental, social and governance (ESG) will create multiple business opportunities in renewable energy for the Heavy Engineering sub-segment. However, ongoing project execution remains challenging due to raw material price escalation and global supply chain disruption which resulted in additional costs and schedule impact, which the recovery will be pursued from clients. Meanwhile, despite an anticipated increase in demand for dry-docking activities from a rise in seaborne trade requirements, the Marine sub-segment is also expected to remain challenging given the stiff competition from Chinese shipyards further to the re-opening of China’s borders. The Marine & Heavy Engineering segment will continue exploring opportunities in the domestic and international markets with increased emphasis on decarbonisation and renewable energy. It also remains committed to the execution and delivery of all projects meeting clients’ requirements. Additionally, it will look to improving its contracting strategies with clients through alliance concept or cost-plus basis to mitigate economic uncertainties for future projects.

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