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Financial review for current quarter and financial year to date
The Group's current quarter revenue of RM165.5 million (3Q18: RM112.2 million) registered a 47.5% growth as compared to the preceding year corresponding third quarter. For the nine months period ended 30 September 2019, revenue increased to RM403.0 million compared to RM269.9 million recorded in the preceding year corresponding period.
The Group recorded a pre-tax profit of RM28.8 million in the current quarter (3Q18: RM10.6 million), after recognizing the other income amount of RM6.9 million following the amicable settlement reached between KKB Builders Sdn Bhd (a wholly owned subsidiary of KKB Engineering Berhad) and Global Upline Sdn Bhd in settlement of the Arbitration Award dated 31 July 2018. For the nine months period ended 30 September 2019, the Group's pre-tax profit increased by more than two fold to RM46.7 million (9 months 2018: RM16.4 million). Comparatively, the Group's current year nine months pre-tax profit has already surpassed the preceding financial year twelve months pre-tax profit by RM17.2 million or 58.3%. For the financial year ended 31 December 2018, the Group recorded a pre-tax profit of RM29.5 million.
The Group's overall improved performance for the current quarter and year-to-date was mainly driven by the improvement in revenue from its Steel Fabrication and Construction divisions coupled with improved margin for the Engineering sector.Engineering Sector
Revenue for the Steel Fabrication and Construction divisions has improved over the preceding year corresponding quarter. The Engineering sector's total revenue improved by 49.7% to reach RM149.4 million (3Q18: RM99.8 million), resulting from higher progress billings from on-going projects for both the Civil Construction and Steel Fabrication divisions.
Revenue for the Construction's division increased to RM76.7 million in the current quarter compared to RM59.3 million recorded in the preceding year corresponding quarter. Revenue for the quarter was derived from the on-going Pan Borneo Highway project (Phase 1 Works Package Contract - WPC-09) undertaken by the subsidiary Company i.e KKBWCT Joint Venture Sdn Bhd. The other contribution came from the two projects secured during the year from Jabatan Bekalan Air Luar Bandar Sarawak for the Design, Construction, Completion, Testing and Commissioning of Proposed Package SR1 (Southern Region) and the Construction and Completion of 900mm Nominal Diameter MSCL Pipeline and All Associated Works from Summer Mall Junction to Existing Tambirat BPS, Samarahan Division (Package 1C) implemented under the Sarawak Water Supply Grid Programme undertaken by the Company.
For Steel Fabrication division, the current quarter's revenue of RM72.0 million (3Q18: RM39.7 million) registered an increase of 81.4% over the preceding year corresponding quarter. Current quarter's revenue was mostly derived from the EPCIC of Wellhead Platforms for D18 Phase 2 Project for Petronas Carigali Sdn Bhd, the Provision of Procurement and Construction of Wellhead Deck, Piles and Conductors for the Pegaga Development Project (Mubadala Petroleum) in Block SK320, offshore waters of Sarawak awarded by Sapura Fabrication Sdn Bhd, the Provision of Engineering, Procurement, Construction and Commissioning of New ESP Module for Upgrading and Modification on MAMPU-1 and AJK Platform for Vestigo Petroleum Sdn Bhd awarded by MISC Offshore Floating Terminals Dua (L) limited, and other miscellaneous fabrication works.
For Hot Dip Galvanising division, revenue of RM633K for the current quarter remained low, as compared to RM838K recorded in the preceding year corresponding quarter. Revenue was mainly contributed from the supply of galvanized Low and High Tension Steel Poles to Syarikat Sesco Berhad and walk in customers.Manufacturing Sector
The Group's Steel Pipes manufacturing division saw an increase of 47.2% in revenue. The supply of Mild Steel Cement-Lined Pipes to Jabatan Bekalan Air Luar Bandar Sarawak for the Sarawak Water Supply Grid Program and other ad-hoc customers in Kota Kinabalu, Sabah has enabled the Group to register revenue of RM13.1 million in 3Q19 compared to RM8.9 million in the preceding year corresponding quarter.
LPG Cylinders manufacturing division recorded revenue of RM3.0 million (3Q18: RM3.5 million). RM1.4 million was from the supply of new LPG cylinders to Petronas Dagangan Berhad and the remaining from the Reconditioning/Requalification of LPG Cylinders for Petronas and Mygaz Sdn Bhd.
The Group expects to achieve strong results for the financial year ending 31 December 2019, supported by the existing contracts in hand for the on-going construction works and Major Onshore fabrication jobs for the Oil & Gas facilities.
The Group is continuously pursuing various engineering projects, particularly projects related to the supply, laying and commissioning of water pipes and other related infrastructure works scheduled to be implemented under the Sarawak Water Supply Grid Program.
In addition, the Group's entry into the Oil & Gas sector via its subsidiary Company, OceanMight Sdn Bhd the last six (6) years, will continue to tender for new projects related to the Major Onshore Fabrication with continued effort on prudent cost management and operational efficiency to remain robust and competitive.
OceanMight Sdn Bhd has been awarded the PETRONAS Frame Agreement for the Provision of Engineering, Procurement and Construction ("EPC") of Fixed Offshore Structure works by Petroliam Nasional Bhd effective from 12 December 2018 and continue for a period of six (6) years, unless terminated earlier. The Frame Agreement open up more opportunities to OceanMight, being one of the few PETRONAS Licensed Yards in Malaysia to bid for contract works involving the EPC of Fixed Offshore Structure works by Petroliam Nasional Bhd.
Currently OceanMight is working on the Provision of Procurement & Construction of Wellhead Deck, Piles and Conductors for the Pegaga Development project for Sapura Fabrication Sdn Bhd and the Provision of Engineering, Procurement, Construction and Commissioning of New ESP Module for Upgrading and Modification on MAMPU-1 and AJK Platform for Vestigo Petroleum Sdn Bhd awarded by MISC Offshore Floating Terminals Dua (L) Limited.
With the recent award of several contracts for the supply of steel water pipes and water related construction works under the Sarawak Water Supply Grid Program, it is anticipated that performance for both the Engineering and Manufacturing sectors will remain strong in the remaining period of 2019, barring any unforeseen circumstances.
The Board however continues to manage the challenges of uncertainties in the global economic environment, escalation of costs due to inflationary pressure, volatility of global raw material steel prices and fluctuation of exchange rates are amongst factors that may impact the Group's performance.