Malaysia Marine & Heavy Engineering (MMHE) experienced a decline in shares following the announcement of a third-quarter loss. The company cited additional cost provisions for its ongoing projects as the main reason for the disappointing financial results.
Shares of MMHE fell by as much as 7.5% and were recently down by 5.7% at 0.50 ringgit. This brings the year-to-date losses for the company to 16%.
In its statement on Wednesday, MMHE revealed a net loss of MYR105.2 million ($22.5 million) for the third quarter, compared to a net profit of MYR15.9 million during the same period last year. The loss was primarily attributed to additional cost provisions for its continuing heavy-engineering-segment projects. The company also mentioned that the weakening of the ringgit against the U.S. dollar impacted receivables hedging for one of its projects.
Despite the setback in profitability, MMHE reported a 56% increase in quarterly revenue, reaching MYR638.5 million. This growth was driven by higher revenue contribution from the heavy-engineering segment, thanks to new and ongoing projects.
Looking ahead, MMHE acknowledges the challenges it faces in executing its current works within projected margins. Rising raw-material prices and disruptions in the global supply chain are expected to continue impacting the company’s heavy-engineering segment. The marine business is also expected to remain challenging due to slower demand and intense competition.
However, MMHE’s Managing Director, Pandai Othman, sees potential opportunities amidst these challenges. He highlighted that geopolitical tensions in the Middle East and ongoing OPEC+ output cuts could lead to a tight supply and higher oil prices. This scenario may compel the company to increase its capital spending beyond pre-pandemic levels.
Moreover, Othman emphasized the growing significance of environmental, social, and governance factors, which could create more business opportunities for MMHE in the renewable energy sector. He expressed the company’s commitment to exploring both domestic and international markets with a greater focus on decarbonization and renewable energy.
In conclusion, while MMHE grapples with losses and various industry challenges, it remains determined to adapt to the evolving market landscape and capitalize on emerging opportunities.