SapuraKencana to focus on boosting top line

SERI KEMBANGAN: SapuraKencana Petroleum Bhd, which has an order book of close to RM20 billion, is looking for business acquisitions and more job awards to prop up its revenue, after saving some RM500 million through cost cuts.
“Now, we want to focus on bringing in the top line. Over the past two years, we’ve been focusing on taking the cost out,” president and CEO Tan Sri Shahril Shamsuddin told a press conference here yesterday after the group’s three-hour long AGM yesterday.
He noted that SapuraKencana has saved some RM500 million in operation cost since the beginning of the low oil price environment.
“We’re targeting to squeeze another RM250 million per annum. This is important because our internal target for oil prices is US$35 to US$40 per barrel,” he explained.
Nonetheless, with the improved oil prices recently, Shahril stressed that SapuraKencana is eyeing more small jobs as well as expanding its presence globally. Its current tender book stands at US$7 billion (RM28.5 billion).
“The US$7 billion is very competitive because there are so few jobs out there, yet there are still the number of players going for these projects, so we need to very careful with the risk mitigation process in order not to get into trouble,” Shahril said.
SapuraKencana reported a 57.69% decline in net profit to RM110.31 million for the first quarter ended April 30, 2016, compared with RM260.69 million in the previous corresponding period.
“We made profit in Q1, we hope to make a little bit more (in the subsequent quarters). It’s a bit challenging, but we’re trying hard to give positive results,” he said.
Shahril noted that all SapuraKencana’s projects are earnings before interest, taxes, depreciation and amortisation (ebitda) lucrative at the current oil prices of about US$45 a barrel, which in turn continue generating cash flow for the group.
“Now we see the inflection point of improving oil prices, you see the energy business leading up and the contracting side following behind, so our cash flow won’t see a violent dip because of compensating factors of different businesses,” he opined.
As at April 2016, SapuraKencana has RM2.34 billion in cash with a net gearing of 1.27 times.
Commenting on the mutual cessation of the Berantai Risk Service Contract with Petroliam Nasional Bhd (Petronas), Shahril is of the view this is not unusual and that the state-owned oil major may want to leverage the assets that SapuraKencana has built.
“When we operate, we operate as a contractor. But when Petronas operates, it is their own asset, so there is no third party cost for them,” he said.