Deleum's 4Q profit shrinks on lower O&G activity, RM4.5m impairment

TheEdge Mon, Mar 29, 2021 07:36pm - 3 years View Original


KUALA LUMPUR (March 29): Deleum Bhd, who announced last week that its 60%-owned Deleum Primera Sdn Bhd has been suspended from participating in Petroliam Nasional Bhd's tenders and contracts until further notice, reported today that its fourth quarter net profit fell 12.5% to RM7.5 million from RM8.57 million a year ago, following a slowdown in activity levels across all its business segments.

The oil and gas company's profit for the three months ended Dec 31, 2020 (4QFY20) was also affected by a non-recurring one-off impairment charge of RM4.5 million on its oilfield services business' operating assets. Quarterly revenue fell 32.3% to RM157.23 million from RM232.13 million in 4QFY19, its stock exchange filing showed.

The group declared a first dividend of 1 sen per share for FY20, payable on April 27. In contrast, the group paid a total of 4.4 sen dividend per share in FY19.

Deleum said its fourth quarter ended Dec 31, 2020 earnings were principally affected by lower activity volumes in valve and flow regulator services and aftersales support services from its power and machinery segment; weaker slickline operations and gas lift valve services from the oilfield services segment; and a slowdown in maintenance contract orders from the integrated corrosion solution segment.

Compared with the immediate preceding quarter of 3QFY20, the group's net profit contracted 15.9% from RM8.92 million – though revenue rose 8.5% from RM144.91 million – dragged by weaker contributions from both its power and machinery segment, and its oilfield services segment, with the latter having to book the previously mentioned RM4.5 million impairment.

Cumulative net profit for FY20 sank 77.6% to RM7.43 million from RM33.15 million in FY19, while revenue declined 31.8% to RM592.10 million from RM868.29 million.

While the group saw weaker results across all segments following lower activity levels for the entirety of FY20, Deleum said its financials was further impacted by the RM30.3 million impairment charges it logged from all its reportable segments’ operating assets, and the RM1 million it provided for doubtful debts on trade receivables. It also recorded inventory write-offs of RM3 million and other receivable write-offs of RM0.6 million, and impairment charges made on long-term corporate other receivables that totalled RM1.2 million.

“Looking ahead, Deleum anticipates a delicate recovery of demand in oil and gas, as uncertainties over the impact of the Covid-19 pandemic remain. Supply remains in excess in the first quarter of 2021. Deleum will remain focused on preserving its sustainability and resilience to weather the continuing challenges and uncertainties for the remainder of the financial year,” the group said on its prospects in a separate statement.

On March 26, Deleum said Petronas informed Deleum Primera that it had been suspended from partaking in future tenders, after the national oil company received adverse reports on alleged unethical and integrity issues linked to Deleum Primera with regards to relevant work under the operations of Petronas Carigali Sdn Bhd.

The suspension came after two senior executives working for Deleum Primera were interviewed by the Malaysian Anti-Corruption Commission (MACC) last December, over an alleged illegal scheme involving the company and Petronas Carigali.

Shares in Deleum finished 9.6% or six sen lower at 56.5 sen today, valuing it at RM226.88 million. It saw 4.74 million shares traded.

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