The boat is sinking: Kim Heng suffered a whopping 66% profits crash to $1.6m

Blame it on quick order turnaround time.

Kim Heng Offshore & Marine reported a 2.8% YoY rise in revenue to S$20.1m in 2Q14, mainly due to higher revenue in the Vessel sales and newbuild segment of S$3.8m which offset a decrease in revenue from the Offshore rig services and supply chain management segment.

Delays in the arrival of drilling rigs and offshore support vessels from customers meant that Kim Heng undertook a higher proportion of lower margin projects in the quarter, leading to a drop in gross profit margin from 45.3% in 2Q13 to 30.2% in 2Q14.

Here's more from OCBC:

This led to a 66% YoY fall (-60% QoQ) in net profit to S$1.6m in 2Q14, such that 1H14 net profit met 30% of our full year estimate.

Management highlighted the lumpy nature of its earnings due to the short notice period for new work and quick turnaround time for its orders. The group remains optimistic of its 2H14 financial performance, barring unforeseen circumstances.

Meanwhile, with regards to its waterfront yard and facilities at 48 Penjuru Road, management updated that it has got clearance from JTC for lease extension till 2036.

Management believes that it is also likely to get another 20 years for its facility at 9 Pandan Crescent. The group also plans to build a dormitory housing 500 people (completion likely by 2Q15) with a capex of about S$4-5m. It is currently spending S$90-100k/month on its workers’ accommodation.