MISC Berhad, Malaysia’s provider of energy-related maritime solutions and services, returned to the black for financial year ended December 31, 2021, posting a net profit of RM1.83 billion (US$435 million) compared to a net loss of RM43 million in the previous financial year.  

MISC said the turnaround in financial year 2021 was partly due to previous year’s provision for litigation claims, write-off of trade receivables and loss on remeasurement of finance lease receivables relating to the adverse decision on arbitration proceedings by Gumusut-Kakap Semi-Floating Production System against Sabah Shell Petroleum Company.  

The profit was achieved on the back of RM10.67 billion group revenue, which grew 13.5 percent from RM9.4 billion recorded for financial year 2020, MISC said in a filing to Bursa Malaysia Stock Exchange on February 17.

MISC said that the higher revenue was mainly contributed by revenue from floating, production, storage and offloading (FPSO) activities in the offshore business segment and deliveries of five Very Large Ethane Carriers (VLECs) since the fourth quarter of 2020 in the gas assets & solutions segment. 

However, MISC said the increase in revenue was partially negated by lower earnings in the petroleum & product shipping segment from lower freight rates and lower earning days from vessel disposals and redeliveries since last year. 

In addition, the marine & heavy engineering segment also recorded lower revenue mainly due to lower dry-docking activities as a result of prolonged border restrictions imposed by the Malaysian government to curb the Covid-19 pandemic. 

MISC declared a fourth tax exempt dividend of 12 sen per share in respect of its financial year 2021, payable on March 16, 2022.  

For the fourth quarter of financial year 2021, MISC’s net profit fell to RM461.7 million from RM556 million in the previous year, while group revenue rose 17 percent to RM3.09 billion from RM2.64 billion in the previous year, primarily contributed by better revenue from the offshore business segment following higher revenue from the conversion of a unit of FPSO. 

Additionally, the petroleum & product shipping segment has also contributed to an increase in revenue following higher freight rates in the Aframax segment and higher earning days for Dynamic Positioning Shuttle Tankers mainly from the delivery of one such vessel since last year. 

Higher earning days from the deliveries of five VLECs in 2021 contributed to an increase in the gas assets & solutions segment’s revenue. However, this increase was reduced by lower revenue in the marine & heavy engineering segment mainly due to lower activities for ongoing heavy engineering projects and lower dry-docking activities in the marine sub-segment in the fourth quarter of financial year 2021. 

Focus on ESG

MISC’s president and group CEO Datuk Yee Yang Chien said MISC’s fourth quarter and full financial year results for 2021 demonstrated the group’s continued resilience as it sustained the upward momentum to end the year with measured confidence.

Yee also said that the group, over the years, has been consistently integrating the environmental, social and governance (ESG) principles into its business, in line with a future-focused approach in driving long-term sustainable value for its stakeholders. 

“As a result of our firm focus and commitment to sustainability, we achieved a significant milestone on the global front with our debut on the Dow Jones Sustainability Emerging Markets Index in 2021,” he said in a separate statement.

On the group’s expectations ahead, Yee said that MISC foresees varying macro headwinds lingering in 2022 due to multiple factors affecting the near-term global economic recovery.

“Despite these challenges, we shall remain steadfast in our priorities and focus on ensuring the successful execution of our projects, delivering them into operations and converting them into cash-generating assets in the years to come,” he said. 

According to Yee, MISC will continue to invest strategically, prioritizing key growth opportunities and maximizing value creation for all stakeholders as the group continues to operate safely, responsibly and sustainably. 

Outlook 

MISC said that although spot rates have since eased moving into 2022, the medium-term outlook for LNG shipping remains favorable as reflected by the record number of new LNG carriers ordered in 2021. The operating income of the gas assets & solutions segment continues to remain stable, supported by the existing portfolio of long-term charters. 

MISC said that the petroleum shipping market continues to be challenged by low freight rates although there has been some modest improvement in the fourth quarter of last year. 

“Despite continuing oil demand recovery and easing of production cuts by OPEC+ in 2021, seaborne trading volumes have remained below pre-pandemic levels, while the tanker fleet has continued to grow, albeit slowly. In the short term, the outlook is clouded by the rapid spread of the Omicron virus variant.” 

However, MISC said the tanker market fundamentals are expected to improve further this year, especially towards the second half. 

“Given the uncertain landscape, the petroleum shipping segment will continue to focus on building long-term secured income through its niche shuttle tanker business and rejuvenation of its fleet with eco-friendly tankers.” 

According to MISC, as the oil market continues to rebalance and with oil prices staying high, the outlook of the upstream oil and gas sector continues to be positive. The group said that FPSO contract awards rebounded strongly in 2021 after the slump in 2020, and demand for FPSOs is expected to stay robust in 2022, despite lingering COVID-19 concerns.

The offshore business segment will continue to focus on the execution of the FPSO project in hand while sourcing for opportunities in targeted markets. In the meantime, the segment’s existing portfolio of long-term contracts will underwrite its financial performance. 

The surge of Omicron variant cases globally has caused concerns for the oil and gas industry heading into 2022, despite the improved oil and gas demand in 2021. As such, the marine & heavy engineering segment remains vigilant on the prospects of its heavy engineering sub- segment.

With high LNG demand, the expected increase in LNG trade would lead to dry-docking deferrals resulting in stiffer competition amongst shipyards for limited dry-docking opportunities.

MISC said: “Considering various border restrictions worldwide, foreign clients will continue to send their vessels to other countries with less restrictions, hence the marine sub-segment is expected to remain challenging. 

“Given this environment, the segment will remain focused on replenishing its order book, as well as prioritizing cost management efforts, safe execution and timely delivery of ongoing projects.”

Meanwhile, MIDF Research said that MISC’s earnings is in line with its forecast, and reiterated a positive view on MISC, based on the group’s robust order book and balance sheet, strong performance on its LNG shipping and offshore businesses on the back of improving demand, and varied business strategies that allow for operation and income mitigation.

MISC’s modern and diverse fleet consists of around 100 owned and in-chartered vessels comprising liquefied Natural Gas (LNG) and ethane carriers, petroleum and product vessels, floating production systems (FPS) as well as LNG floating storage units (FSU) with a combined deadweight tonnage (dwt) capacity of more than 13 million tons.