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Mermaid Maritime's Q1 profit down 41.7% as associate's profit falls

THAILAND-BASED Mermaid Maritime's net profit for the first three months of financial year 2017 shrank by a year-on-year 41.7 per cent, as its associate company's profit tumbled.

This comes even as the subsea and offshore drilling services company says that the market "appears to have turned the corner", with oil prices stabilising and consolidation in the sector coming to an end.

Singapore mainboard-listed Mermaid's net profit reached US$735,000 for Q1 2017, down from US$1.27 million a year ago, it said in financial results released after the market closed on Monday.

Mermaid said its associate Asia Offshore Drilling (AOD), a drilling contractor, had cut its day rate for a contract that was renewed in 2016. Through a profit-sharing arrangement, this lowered Mermaid's profits. Mermaid has 33.76 per cent equity stake in AOD.

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Revenue fell by 7.8 per cent to reach US$36.5 million. Earnings per share remained constant at 0.1 US cent.

But cost savings helped Mermaid achieve better financial health. It says its Ebitda (earnings before interest, taxes, depreciation and amortisation) increased from US$2.1 million in Q1 2016 to US$5.8 million in Q1 2017. This was due to lower costs in its subsea business. It says running costs in this segment fell by 34 per cent.

Looking ahead, Mermaid said it deems the market to have turned the corner. Oil price is gradually stabilising, it said, but there will still be some time lag for subsea activity.

In addition, it says that competion is easing now as "several other subsea companies exit. "Remaining players in survival and adaptation mode."

It has secured a pipeline of contracts. It says three AOD jack-up drilling rigs had secured extentions in Middle East for another three years until 2019.

Mermaid's counter closed 1.1 per cent higher on Monday at S$0.183.