Ezion sinks into the red with a $47.6m loss in 2016

Blame the accumulated impairment losses.

Rig and offshore logistics support service provider Ezion has sunk into the red for the past year, recording a US$33.6m ($47.6m) loss for the period.

This came as the group's revenue decreased by US9.4% to US$318.2m due to the absence of contribution from the projects in Queensland, Australia and the lower contribution from the Group's marine services. Reduction in charter rates as well as the delay in the completion of the modifications and upgrade of the Group's Service Rigs also resulted in a lower revenue.

The cost of sales and servicing for the year increased by US$23.9m (10.3%) to US$257.0m as compared in 2015. The increase was due to the deployment of additional Service Rigs. This resulted in a 48.1% decline in gross profit to US$61.2m.

The group noted that the operating expenses in 2016, included impairment losses on plant and equipment and provision for trade receivables amounting to US$70.9m, in addition to the losses made in the past year. Accumulated impairment losses for the past two years reached US$152m.

With this, the beleaguered group will cancel taking delivery of four service rigs and cut its capital expenditure by US$270m as it completes talks with bankers.

"the Group has completed discussions with all its bankers to reduce its net annual principal repayment to match the Group’s operating cash flows upon the completion of the legal documentation of the loan extension. In addition, the Group has also successfully renewed its working capital facilities with all its
principal bankers," the group said.

Ezion noted that this will l improve the overall liquidity of the Group and its financing cash flows in the near to medium term.