See what drove Hiap Seng Engineering's sevenfold profit increase

Revenues rose an amazing 60.4%.

In a release, Hiap Seng Engineering Ltd (Hiap Seng), a Mainboard-listed specialist integrated engineering group for the oil-and-gas, petrochemical and pharmaceutical industries, announced its net profit for the three months ended December 31, 2012 (3QFY2013) has increased over 7 times to S$2.9 million, compared to S$0.4 million in the previous corresponding period (3QFY2012).

"This was achieved on the back of a 60.4% increase in revenue to S$68.6 million for 3QFY2013, from S$42.8 million in 3QFY2012," said Hiap Seng. "The growth in Group revenue for 3QFY2013 was mainly due to higher recognition of project revenue and contributions by the two new subsidiaries in Thailand and Malaysia."

Hiap Seng's gross profit increased 133.2% to S$8.5 million, from S$3.6 million in 3QFY2012. Gross margin improved 3.9 percentage points from 8.5% to 12.4% year-on-year mainly due to better project cost management.

"Some impact on bottomline was experienced with an 81.7% increase in administrative costs to S$5.6 million due to the consolidation of costs incurred by the new subsidiaries in Thailand and Malaysia. Additionally, the foreign exchange loss of S$0.3 million for 3QFY2013, as compared to a gain of S$0.1 million for 3QFY2012 was primarily due to the weakening of the US dollar against the Singapore dollar," Hiap Seng reported.

Mr. Frankie Tan, Chairman and CEO of Hiap Seng, said: “Our new subsidiaries in Thailand and Malaysia continue to contribute to topline growth, buoyed by the positive momentum of the regional oil and gas industry. In Thailand, our subsidiary, Nasco-Hiap Seng, recently secured a contract worth approximately S$26 million for the provision of structural steel fabrication for an LNG terminal project in Australia, scheduled for completion by May 2014.

 “In Malaysia, we also see opportunities given that annual offshore oil and gas capex in the country is projected to increase 46% to US$5.7 billion in 2013 in the more immediate term. As Malaysia’s national oil company, Petronas is driving much of this offshore oil and gas uptrend, having expanded its capex plan to RM300 billion for 2011 to 2015.” 

For its outlook, Hiap Seng said: "The outlook for the oil-and-gas and petrochemical industries which the Group serves still remains positive and the Directors of the Company are cautiously optimistic about the Group’s performance for the current financial year ending March 31, 2013. However, in view of keen competition and rising costs, the Group will continue to control costs and take steps to improve productivity."