Otto Marine Limited

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Second Quarter 2016 Financial Statements Announcement

Financials Archive

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Income Statement

Income Statement

Statement of Comprehensive Income

Statement of Comprehensive Income

Balance Sheet

Balance Sheet

Review of Group Performance

1. 1H 2016 versus 1H 2015

Revenue

External revenue decreased by US$82.2 million contributed by all segments.

Shipyard - The sale of a comparatively smaller vessel with lower value in 1H 2016 vis-à-vis 1H 2015, as well as, the decrease in fabrication revenue contributed to the decrease in shipyard external revenue by US$72.8 million.

Shipping and chartering - The decrease in revenue (US$6.7 million) was mainly due to lower utilisation of the vessels and reduction in charter rates.

Subsea services - The decrease in external revenue (US$2.7 million) was mainly due to lower utilisation of one of the vessels.

Gross profit (loss)

Shipyard - Gross profit increased by US$8.8 million in 1H 2016 as a result of higher margin enjoyed from the sale of the vessel in 1Q 2016.

Shipping and chartering - Gross profit decreased as a result of lower revenue.

Subsea services - Gross profit increased by US$0.8 million primarily due to reduced operating costs from cost rationalisation measures.

Other income

Other income decreased by US$2.9 million primarily due to the absence of the realization of previously deferred profit on the sale of vessels to associates (US$3.3 million), partially offset by the increase in gain arising from the changes in fair value of interest rate swap contracts (US$0.5 million).

Other expenses

Other expenses increased by US$6.7 million as a result of an increase in foreign exchange loss (US$8.3 million) partially offset by the absence of impairment loss of property, plant and equipment (US$1.8 million).

Selling and administrative expenses

Selling and administrative expenses decreased by US$4.2 million primarily due to the decrease in salaries and wages (US$2.8 million).

Finance cost

The finance costs increased by US$2.3 million mainly due to interest incurred on certain loan facilities drawn down after 1H 2015.

2. Q2 2016 versus Q2 2015

Revenue

External revenue decreased by US$29.0 million, contributed by all segments.

Shipyard - The external revenue decreased by US$13.3 million mainly due to the slowdown in the shipbuilding and fabrication orders, partially offset by an increase in completion of ship repair projects.

Shipping and chartering - The decrease in revenue of US$11.9 million was mainly due to lower utilisation of the vessels.

Subsea services - The decrease in revenue (US$3.8 million) was mainly due to lower utilisation of one of the vessels.

Gross profit (loss)

Shipyard - The gross profit increased as a result of cost cutting measures.

Shipping and chartering - The decrease in gross profit was due to the decrease in revenue and partially offset by a decrease in depreciation as a result of the sale of a vessel in 1Q 2016.

Subsea services - Gross profit decreased by US$0.2 million primarily due to the reduction in revenue.

Other income

Other income increased by US$0.6 million primarily due to the absence of 2Q 2015 net foreign exchange loss (US$4.1 million), partially offset by the absence of the realization of previously deferred profit on the sale of vessels to associates (US$3.3 million).

Other expenses

Other expenses increased by US$4.2 million mainly due to the increase in foreign exchange loss (US$3.6 million) and the increase in property, plant and equipment written off (US$0.1 million).

Selling and administrative expenses

Selling and administrative expenses decreased by US$1.8 million primarily due to the decrease in salaries and wages (US$2.2 million).

Finance cost

The finance costs increased by US$0.7 million mainly due to interest incurred on certain loan facilities drawn down after 1H 2015.

Review of Balance Sheet &/or Cash Flow

ASSETS

The material contributing factors to the decrease in total assets of US$1,380.6 million as at 31 December 2015 to US$1,372.7 million as at 30 June 2016 was primarily due to the decrease in (1) cash and bank balances and fixed deposits, (2) finance lease and loan receivables arising from collection from customers and (3) property, plant and equipment resulting from the sale of vessel and depreciation. The decrease was partially offset by increase in (1) trade receivables due to amounts to be collected from the sale of a vessel, (2) other receivables, deposits and prepayments to vendors and (3) costs incurred under inventories and amounts due from customers for vessels under construction.

LIABILITIES

The increase in total liabilities from US$1,173.4 million as at 31 December 2015 to US$1,186.1 million as at 30 June 2016 was due to the increase in (1) trade and other payables due to slower payments to vendors, (2) gross amounts due to customers for vessels under construction and (3) income tax payables. The increase was partially offset by decrease in (1) borrowings from financial institutions due to loan payments, (2) derivative financial instruments and (3) liabilities associated with assets held for sale. The Group has a negative working capital as a result of the classification of certain loans with tenure of more than 12 months from balance sheet date from non-current liabilities to current liabilities in accordance to FRS 1.74.

Commentary

The persistent challenging market condition, particularly the oil and gas industry, puts continuing pressure on the Group's performance. The Group continues to focus on improving fleet utilisation, while concurrently rationalising its cost structure. As the market continued to be challenging, any adverse events impacting the Company's customers and vendors may have a direct impact on its performance and financial position. The market conditions have not changed since the Company last undertook to assess its vessels' values for the FY2015 audit and the Company will re-assess its vessels' values upon severe adverse changes to the market conditions occurring or at its year-end audit, whichever is earlier. The Company will be delisted from the Official List of the Singapore Exchange Securities Trading Limited from 9.00am on 7 October 2016.