Swiber profit down 25% to $19.49mln

Higher administrative expenses, other operating expenses and finance costs pulled down profit from $26.03mln.

Swiber Holdings Limited (“Swiber” or together with its subsidiaries, the “Group”), a world class integrated construction and support services provider to the offshore oil and gas industry, on Friday reported that it has achieved a net profit of US$14.3 million ($19.49 million) for the three months ended June 30, 2010 (“2QFY2010”) on the back of a revenue of US$106.8 million ($145.57mln), according to a company report.

Revenue remained relatively stable at US$106.8 million ($145.57mln) in 2QFY2010 as compared to US$110.8 million ($151.02 million) in 2QFY2009. The Group recognized contributions arising from projects carried out in South East Asia and South Asia.

Said Mr. Raymond Goh, Executive Chairman and Group CEO of Swiber, “We are encouraged by increasing activities in the oil and gas sector and have continued to invest for future growth during the quarter. However, we remained prudent in managing our business operations and cost efficiencies.”

“Going forward, with renewed confidence from oil companies, we will continuously explore new opportunities to leverage on our strong track record and strategic partnerships. Indeed, our joint ventures with premier companies will further enhance our strong presence in key markets in the region. Our recent partnership with Pak Eddy Sariaatmadja, who has deep local knowledge of the Indonesian market, will bring significant synergies to propel our operations in this country to a new level.”

Performance review
Gross profit remained relatively stable at US$23.6 million ($32.17 million) in 2QFY2010 despite a marginal decline in revenue. Gross margin held steady at 22.1% as compared to 21.5% in 2QFY2009.

The Group’s 25.3% decline in net profit in 2QFY2010 to US$14.3 million ($19.49 million) from US$19.1 million ($26.03 million) in 2QFY2009 was mainly attributed to higher administrative expenses, other operating expenses and finance costs.

Administration expenses increased by 21.4% to US$8.9 million ($12.13 million) in 2QFY2010 from US$7.4 million ($10.09 million) in 2QFY2009 mainly due to an increase in business development costs, staff related costs, higher office and administrative expenses to support the Group’s business expansion.

Other operating expenses increased to US$4.0 million ($5.45 million) from US$300,000 ($408,900) mainly due to changes in fair value of financial derivative embedded in the US$100 million ($136.3 million) 5% Convertible Bonds issued in 4QFY2009 of US$2.3 million ($3.13 million).

Finance costs was up 62.6% to US$4.8 million ($6.54 million) in 2QFY2010 from US$2.9 million ($3.95 million) in 2QFY2009 as a result of the issuance of the US$100 million ($136.3 million) 5% Convertible Bond in 4QFY2009.

Overall, net profit margin declined by 3.9 percentage points to 13.3% in 2QFY2010, as compared to 17.2% in 2QFY2009.

Cumulatively, Swiber’s earnings and revenue for the six months ended 30 June 2010 (“1HFY2010”) was US$22.4 million ($30.53 million) and US$191.3 million ($260,74 million) respectively.

The Group maintained a strong balance sheet with a healthy cash position of US$78.5 million ($106.99 million). Net debt to equity stood at 0.91 times as at June 30, 2010 as compared to 0.84 times as at December 31, 2009.

Swiber’s basic earnings per share, based on its 2QFY2010 results, was 2.7 US cents (3.68 cents) from 3.8 US cents (5.18 cents) in 2QFY2009, the decrease in EPS was mainly due to new shares issued in 2QFY2009, while net asset value per share rose to 62.7 US cents (85.46 cents) as at June 30, 2010, from 58.9 US cents (80.28 cents) as at December 31, 2009.

Growth strategies & outlook
With global economic recovery and stabilisation of oil prices around US$70 – US$80 per barrel, activities in the offshore oil and gas sector has increased and this was evidenced by the pool of new contracts awarded to the Group since November 2009.

During 2QFY2010, the Group secured a total of US$783.0 million worth of contracts, which includes its single largest contract with a consortium partner worth US$618.0 million; and other contracts ranging from US$17.0 to US$148.0 million from leading oil and gas operators in South Asia. Adding on to the consortium awards of US$306 million worth of contracts earlier in 1QFY2010, the Group has secured contract wins totaling US$1,089.3 million for 1HFY2010.

Commenting on the momentum in 2010, Mr. Goh added: “Oil prices are expected to stabilise and we will continue to navigate for new opportunities, whilst managing our cost prudently. We will also look for ways to unlock the value of our business. The recent listing of our subsea business sets a major milestone for us and we are excited about Kreuz Holdings’ plans to expand its range of services through acquisition of new operating assets.”

Swiber’s strong order book of approximately US$915 million is expected to contribute to Group results, barring unforeseen circumstances.