Published March 2, 2009

Late vessels delivery costs Swiber heavily

Project delays cited in Q4 loss; FY08 earnings fall 21.8%

By VINCENT WEE

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OFFSHORE services provider Swiber slid into the red in the final quarter of 2008, due largely to late delivery of vessels which delayed the completion of its projects.

Mr Goh: Swiber has been focused on growing the strength and quality of our fleet to match the demand for our services

The company lost US$8.3 million, in contrast to a profit of US$20 million in the fourth quarter of 2007.

Full-year earnings fell 21.8 per cent to US$38.8 million from US$49.7 million previously as higher cost of sales, administrative and finance costs took their toll during the year.

But continued contracts saw full-year revenue nearly tripling to US$428.4 million, fuelled by more offshore projects which comprise primarily transportation and installation of offshore pipelines and platforms in Malaysia, Brunei, Indonesia and India. Fourth-quarter revenue rose 68.5 per cent to US$102.9 million.

Earnings per share fell to 9.19 US cents from 12.56 US cents in FY2007, while net asset value per share rose to 48.85 US cents as at Dec 31, 2008, from 41.68 US cents the year before.

The deliveries of pipelay barge Swiber Concorde and the dive-support work barge Swiber Supporter, which were originally expected in Q3 FY08, were delayed to Q1 FY09 due to unforeseen circumstances.

With both vessels unavailable for work in Q4, Swiber was unable to perform a significant amount of work slotted for completion relating to pipeline installation and subsea tie-in work for three projects.

In addition, with project work ongoing at multiple locations, the group incurred a higher cost for multiple mobilisations and demobilisations of vessels from project to project, resulting in gross profit margins narrowing from 28.3 per cent previously to 15 per cent in FY08.

'Swiber's revenue growth momentum in FY2008 remained stable despite the economic crisis and our pipeline of orders grew to more than half a billion (US dollars) by end 2008. However, our profitability was affected by a shortage of construction vessels and high third-party costs. We have the projects, we have the skilled personnel but we do not have enough vessels to see some of these projects to completion, which is why Swiber has been focused on growing the strength and quality of our fleet to match the demand for our services,' said executive chairman and CEO Raymond Goh.

Swiber has a healthy outstanding order book of US$596 million as at Dec 31, 2008 - substantially higher compared to US$350 million on order last February. Order momentum is strong, with about US$70 million of new construction projects awarded in Q1 FY09.

On the operating front, full-year administrative expenses rose 68.5 per cent from US$16.6 million in FY2007 to US$28 million in FY2008, reflecting the rise in headcount and general administrative expenses as business activities expanded. But the real hit came from finance costs, which tripled to US$11.1 million from US$3.7 million in FY2007, due mainly to an increase in bank loans and issuance of bonds.

'In view of this unprecedented global recession, Swiber will continue to take a vigilant and conservative approach in carrying out our business strategies in FY2009. A top priority for us is to contain cost and expand our geographical market while continuing to ensure prudent financial and risk management policies,' said Mr Goh.

Looking ahead, Swiber's primary focus will be on offshore construction activity in the shallow waters of the Asia Pacific and the Middle East, and subsequently using these bases as springboards to expand to various points in these regions. The group also intends to target subsea opportunities in the Middle East and India region.

Swiber shares closed half a cent lower at 46 cents last Friday.