Dyna-Mac Holdings predicts flat earnings in 2013

It also expects to sustain its 22-26% gross profit margins.

Nomura met with the management of Dyna-Mac Holdings on the first day of its Nomura ASEAN All Access conference. According to Nomura, the Singapore-based fabricator expects revenues and earnings in 2013 to be flat over 2012 despite rising new orders. 

Nomura adds, however, that the management expects both revenue and earnings growth to pick up substantially in 2014 as new orders secured in 2013 are executed. 

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The Johor yard is currently experiencing low utilization, while management expects the Singapore to have a softer 1H13 but utilization is likely to pick up in 2H13.

The group enjoys gross profit margins within the 22-26% range and expects these to be sustained, although variation orders on contracts could provide some upside to margins. 

Dyna-Mac is in a net cash position as at 31 Dec FY12, with return on equity at 19%.

Management indicated that competition from lower cost destinations such as China and Thailand is on the rise, although these competitors appear to have had only a modest success in project execution at this point. 

Competition from Chinese yards in particular has been intense, given lower labour costs and state backing. Limited headway by Chinese yards in penetrating the offshore module business is largely attributable to their lower familiarity with strict safety and regulatory requirements by international oil companies and environmental agencies. 

Contract documentation is another key weak point among the Chinese yards, according to management.