Harbour-Link sees cloudy O&G work orders outlook
KUCHING: Harbour-Link Group Bhd has warned that its core business in engineering, construction and logistics might be impacted by the uncertainty in global oil prices.
This is because, according to the Bintulu-based company, its work orders are mostly from the oil and gas (O&G) sectors.
The group engineering’s on-going contracts, according to managing director Datuk Yong Piaw Soon, include EPCC cleaning and repair of AGO storage tanks for Kemanan Bitumen Company Sdn Bhd and EPCC contract expanding of PITSB terminal at Pengerang for Dialog group for storage tanks works and general civil works.
The group is eyeing upcoming O&G related projects in several locations, including Pengerang and Tanjung Bin (Johore), Kemaman (Trengganu) , Kuantan (Pahang), Pulau Indah (Selangor), Melaka and Port Dickson (Negeri Sembilan),
Yong said in the company’s 2018 annual report. Harbour-Link is a leading integrated logistic provider, engineering and construction contractor for O&G and power industries locally and globally. The group’s other core businesses are in shipping and marine services.
Global crude oil prices have seen big fluctuations in the past few months. The price of Brent crude, which is the international benchmark for oil prices, plunged about 6 per cent to about US$56 per barrel on Tuesday (Dec 18) from high of US$85 per barrel in early October.
The US (Nymex) crude sank by more than 7 per cent to about US$46 per barrel, the lowest since August2017, on concern of oversupply, according to media reports.
The reports said crude output from US shale fields is set to rise above eight million barrels per day for the first time ever while Russia is reportedly pumping a record of 11.42 million barrel per day this month.
Harbour-Link said the US-China trade war had resulted in “very uncertain” world market, and this might create turmoil in global economic and financial activities.
“Our group is cautious and keep abreast on the development. Hence, our group is cognisant of the industry that we are participating and should maintain the group’s market share and strengthening on core competencies and step up efforts in corporate strategies of clientele development and service innovation as a differentiation factor in the competitive operating environment,” added Harbour-Link on its prospects going forward when releasing its first quarterly results ended Sept 30, 2019 (1Q-2019) recently.
Going forward, the company said it would continue to seek new business opportunities and focus on operational efficiency and cost control effectiveness to better contend with competition. Harbour-Link group revenue rose by about RM14.5 million or 10 per cent to RM158.9 million in 1Q-2019 from RM144.2 million in 1Q-2018. However, group pre-tax profit was down by 7 per cent to RM14.4 million from RM15.5 million during the same period.
The integrated logistics segment (which comprises of transport unit, heavy machinery and heavy lifting unit and freight forwarding unit) recorded revenue of RM41.5 million, which was RM10 million or 32 per cent higher than RM31.4 million in 1Q-2018 while pre-tax profit increased by 22 per cent to RM1.37 million.
The engineering segment returned to the black with pre-tax profit of RM210,000 from loss of RM7,000 as it recorded a 69 per cent increase in turnover to about RM15 million from RM8.9 million in 1Q-2018. The company said the current projects in hand yield lower profit margin.
The shipping and marine segment is the biggest contributor to Harbour-Link group revenue, generating RM102.1 million in turnover in 1Q-2019, which was 5 per cent higher than RM96.9 million previously. The improved turnover was contributed by higher cargo volume handled due to operations in Hong Kong and China.
The segment’s pre-tax profit, however, dipped marginally to RM7.6 million from RM7.7 million.
Harbour-Link is also into property development, which recorded merely RM261,000 in revenue in the quarter under review, down 96 per cent from RM7.2 million in 1Q-2018 as there was no sales of properties in its project – Kidurong Gateway – located in the Kidurong Light Industrial Estate.
Yong said the company would develop Kidurong Gateway’s entire 100 acres into a township with integrated facilities. So far, phase 1 and 2 of the project have been launched.
On the market outlook for the new financial year, Yong said: “The board expects a challenging year ahead especially in the shipping and marine services and engineering services as the domestic economy has not shown any sign of a stable recovery.”
In financial year ended June 30, 2018, Harbour-Link recorded higher group revenue of RM646.6 million as compared to RM525.7 million in FY2017 while pre-tax profit improved to RM59.5 million from RM46.7 million during the same period.