Singapore-base offshore company Vallianz h[ds_preview]as reported a net profit 15.6 mill. $ for the full year 2016 – a decline of 22.7 % year-on-year. As part of a »right sizing exercise«, the group has ceased operations of its shipyard in Singapore and the provision of crew management at the end of 2016.
The group’s revenue in 4Q2016 and 12M2016 softened by 11.9% and 10.1% to 41.4 mill ion and 209.1 mill. $ respectively, due mainly to lower contributions from its vessel management services. This is in line with the group’s strategy to focus on its core vessel chartering and brokerage business which generated relatively stable revenue in 12M2016 compared to the year-ago period. As a result, charter and brokerage services accounted for a higher 82% of Group revenue in 12M2016 as compared to 64% in 12M2015.
The gross profit margin in 4Q2016 narrowed to 26.7 % compared to 30.5 % in 4Q2015. For 12M2016, the Group’s gross profit margin also declined to 25.5 % from 28.4 % in 12M2015. This was due mainly to renewal of certain existing contracts at a lower average charter rate.
According to the company, its efforts to rationalise its cost structure amid a slower market environment have also led to a substantial reduction in its administrative expenses for both 4Q2016 and 12M2016. Finance costs in 4Q2016 and 12M2016 shrank compared to the corresponding periods last year. The cost savings helped to partially buffer the negative impact arising from lower gross profit, reduction in other income, foreign exchange loss, and share of results of associate and joint ventures.
These factors contributed to the decline of 35.4 % in net profit to 3.1 mill. $ in 4Q2016. Consequently, net profit for 12M2016 was down 22.7 % year-on-year to 15.6 mill. $ from 20.1 mill. $ previously.
Shipyard and crew management operations ceased
As part of its right sizing exercise, Vallianz has ceased operations of its shipyard in Singapore and the provision of crew management and travel management services to the offshore oil and gas industry at the end of 2016. The operating environment for offshore support vessel (OSV) operators remains difficult as the industry continues to be afflicted by intense competition, downward pressure on charter rates and low vessel utilisation amid supply-demand imbalances in the OSV market.
As at 31 December 2016, the Group had an outstanding chartering services order book valued at approximately 950.1 mill. $ in aggregate, comprising primarily long term charters which include two year extension options stretching up to 2025. These charter contracts are mainly with a national oil company in the Middle East.
Stable operations for Vallianz in the Middle East
Ling Yong Wah, CEO of Vallianz, said: »The group’s profitable performance throughout 12M2016 was buoyed primarily by our stable operations in the Middle East and our continual efforts to optimise the group’s cost structure to be aligned with prevailing market conditions. From the onset, the group’s strategy was to build our business in the Middle East primarily on long-term charter contracts with national oil companies. Over the years, we strengthened our capabilities, customer relationships and order book to establish a sound and stable base for our Middle East operations.«
According to Ling this has helped the Group to sustain a leading market position in Middle East despite rising competition, as well as partly mitigate the challenges faced in other regions where vessel charter rates are under greater pressure due to sluggish demand and intense industry competition. »In addition, the Group has been implementing a cohesive strategy to streamline its business operations. To this end, we have closed non-core business units that will further lower our cost structure and sharpen our focus on our core vessel chartering operations,« he added.
