TH Heavy allocates capex of RM891m

by **Cals** Fri 13 Jun 2014, 02:36

Business & Markets 2014

Written by Sulhi Azman of theedgemalaysia.com

Thursday, 12 June 2014 10:10

KUALA LUMPUR: TH Heavy Engineering Bhd (THHE) has allocated up to RM891 million in capital expenditure (capex) for the next two years, out of which up to US$250 million (RM800.88 million) will be used for its floating production and storage offloading (FPSO) segment and RM90 million for its yard operations in Pulau Indah, Selangor.

“The capex plan will span through December next year. We are looking (at financing the capex) through the debt capital market, particularly Islamic instruments,” its managing director and chief executive officer Nor Badli Mohd Alias told reporters after the group’s annual general meeting yesterday.

THHE is targeting to grow its revenue for the financial year ending Dec 31, 2014 (FY14) by 20%, driven by existing jobs that it has secured.

Its current order book stands at some RM300 million, which will keep the group busy until mid-2015. It has a tender book of RM4.3 billion.

“Based on the tender list submitted, the total contract value for the projects that we are currently bidding [six upstream jobs] for is worth RM4.3 billion. We expect the results of the bid to be announced later this year,” Nor Badli said, expecting a 15% to 20% bidding success rate.

On its yard expansion capacity to 20,000 tonnes per year from 10,000 tonnes per year, Nor Badli said the work is expected to be completed by the third quarter of this year.

“The total yard upgrading and expansion work is expected to cost RM88.8 million, and the targeted completion date is by end-3Q,” he said.

For FY13, THHE saw its net profit plunge 94% to RM1.56 million from RM24.17 million the previous year due to lower realised margin, provisions made on some disputed claims and damages as well as higher operating costs to support future projects under bidding.

Revenue, however, rose 36% to RM259.93 million from RM190.37 million in FY12.

On the nature of disputed claims and damages, Nor Badli said it was due to liquidated ascertained damages and undisputed claims of RM5.6 million for its West Desaru Project in Johor.

Last year, THHE also saw its salaries, wages and others doubled to RM39.9 million from RM17.9 million, on additional manpower recruitment which rose to 438 from 229 in 2012.

“The additional manpower recruitment was necessary to support the proposal, bidding and on-going project requirements,” Nor Badli explained.

Going forward, Nor Badli said that THHE is confident of continuing to drive profit growth through proactive measures to contain costs and improve project margin, despite a “continuing challenge, austerity and transition period”.

“The steps we are taking include purchase of own equipment, mechanisation and automation of certain fabrication process. We will also reduce project overhead costs such as project management team costs, equipment costs and other yard overheads that will be shared with other projects,” he said, adding that the group plans to venture to the Middle East and Thailand.

This article first appeared in The Edge Financial Daily, on June 12, 2014.