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Swiber sees profit slip but pins 2015 hopes on emerging markets and shallow plays

13th November 2014

Swiber Holdings has seen a 22.8 per cent drop in profits in the first nine months of 2014 compared to the same period in 2013, but looks ahead to 2015 and emerging exploration and production markets

Swiber sees profits drop but pins 2015 hopes on emerging markets and shallow plays
Barring unforeseen circumstances, it anticipates the order book to grow as the group continues to actively bid for new projects in its target markets

“The new projects that Swiber clinched earlier this year are scheduled to start from the final quarter of the year,” said Francis Wong, Swiber Group chief executive officer and president.

“At the same time, we have been actively bidding for new orders in our target markets, particularly in Southeast Asia, which is our primary revenue driver, as well as in South Asia, Latin America and West Africa.

“As an affirmation of our commitment to the development of Mexico’s oil and gas industry, Swiber is flying the Mexican flag on five of our vessels. This further establishes Swiber as a local key player as we continue to step up our level of local support to our clients and potential customers operating in Mexico.”

As at 12 November 2014, the Group’s order book stood at approximately USD 535m.

Barring unforeseen circumstances, it anticipates the order book to grow as the group continues to actively bid for new projects in its target markets.

Swiber Holdings has reported a net profit of USD 40.1m for the nine months ended 30 September 2014 - a decline of 22.8 per cent from USD 51.9m in the same period last year.

“While global oil prices have experienced a decline recently, we believe shallow water field development work will continue to take place and generate demand for EPIC services. Swiber’s business model focuses mainly on the execution of EPIC projects for shallow water exploration and production activities. Having built a sound reputation in this domain, we will continue to seize opportunities in growth markets across the Asia Pacific, Latin America and West Africa.”

Group revenue so far in 2014 contracted by 36.3 per cent to USD 526.2m compared to USD 826.0m in the same period last year, mainly due to lower revenue recognition from ongoing projects which were substantially completed in FY2013.

In addition, the activities for its new EPIC (engineering, procurement, installation and construction) projects have not commenced in the three months ended 30 September 2014.

As a result of lower revenue, the group’s gross profit margin narrowed to 5.1 per cent from 15.3 per cent previously, due to under absorption of fixed costs.

However, other operating income surged to USD 114.6m from USD 13.6m in the same period, driven mainly by the gain from the disposal of a group of subsidiaries. In line with the streamlining of its operations, the group’s administrative expenses were also pared to USD 45.0m in 9M2014 from USD 49.9m previously.

Other operating expenses and finance expenses increased to USD 27.4m and USD 47.2m respectively in 9M2014, due to higher net fair value loss on financial instruments, and higher borrowings and issuance of debt securities. On the other hand, the group recognised a larger share of profit of associates and joint ventures amounting to USD 29.1m during 9M2014.

For 3Q2014, the group reported a net loss of USD 22.9m compared to a net profit of USD 14.5m in 3Q2013. This was attributable primarily to a 60.9 per cent decrease in revenue to USD 107.3m, which caused gross profit to fall to USD 847,000 from USD 39.0m in 3Q2013. The top line in 3Q2014 was lower as revenue from ongoing projects was substantially recognised during FY2013.

Swiber will also continue to place a strong emphasis on enhancing its operational performance and maximising cost efficiencies. As part of its reorganisation efforts to streamline the group’s business operations, Swiber recently announced the proposed sale of its 100 per cent interest in Newcruz International and its 49 per cent stake in PTSB Holdings for USD 36.1m to Vallianz Holdings Limited. The group presently holds a 23.36 per cent stake in Vallianz, which is a fast growing provider of offshore support vessels and integrated marine solutions to the oil and gas industry.

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