Ezra slips into the red in Q1, plans to boost vessel utilisation

Singapore

EZRA Holdings, which slipped into the red in the fiscal first quarter (Q1 FY2016), plans to stay the course in cutting costs and bumping up vessel utilisation, its group chief executive told The Business Times.

For the three months ended Nov 30, 2015, Ezra posted a net loss attributable to equity-holders of US$55.35 million, a reversal from the US$54.4 million net profit for the previous corresponding quarter.

The net loss, which comprises US$18.65 million from continuing operations and US$36.7 million from discontinued operations, translated to loss per share of 1.88 US cents, against earnings per share of 3.24 US cents a year ago.

Revenue rose 19 per cent to US$152.3 million as an increase in turnover mainly from its yard operating subsidiary, Triyards, more than offset a US$19.3 million fall in revenue at its offshore support and production services division, Emas Offshore Ltd (EOL).

Gross profit margin for the group fell to 10 per cent, from 22 per cent a year ago, dragged down by softness in the offshore support vessel market.

Lower vessel charter rates and decreased fleet utilisation weighed on the performance of EOL.

But group CEO Lionel Lee suggested in an interview with BT that a recovery could be in sight for EOL, with the dust of a cost-restructuring exercise expected to settle.

EOL unveiled a 60 per cent year-on-year cost reduction in its Q4 results and looks to further cost rationalisation in the next four to five months, according to Mr Lee.

For the year, the aim is to lift vessel utilisation at EOL to 75 per cent from the average 67 per cent reported in Q1, Mr Lee said.

The offshore production and support services division is a contender in ongoing tenders for 19 offshore support vessels in South-east Asia and another 40-50 OSVs in Africa, market reports said.

With hundreds of OSVs waiting on employment globally, as indicated in analyst reports, competition will be stiff for the contracts, which will continue to exert pressure on vessel operating day rates.

BT understands, however, that one of the outstanding tenders is for a five-year exploration drilling campaign off South-east Asia - a positive sign in the current market downturn.

Ezra's subsea division - in which Japan's Chiyoda will pick up a 50 per cent interest as a joint venture partner - has also put in bids before Christmas for US$2 billion to US$3 billion worth of contracts, Mr Lee said.

The transaction for the 50-50 joint venture, Emas Chiyoda Subsea, is expected to be completed in the first quarter of 2016.

Mr Lee said Emas Chiyoda Subsea will continue to operate out of the existing bases in Singapore, Houston and Oslo.

Previously announced plans to set up Emas Chiyoda Subsea in London are under review with joint venture partner Chiyoda, according to Mr Lee.

This comes amid the fall in Brent oil prices to a 12-year low of under US$31.

Mr Lee also warned that a protracted market downturn could force further cuts to staff strength at Ezra Holdings.

Shares in Ezra closed on Thursday at S$0.076, down 0.002 cent.