UMW Holdings net loss widens in Q4 on provision, impairment

PETALING JAYA: UMW Holdings Bhd's net loss for the fourth quarter ended Dec 31, 2016 widened to RM1.6 billion from RM284.3 million a year ago due to a provision for financial guarantee contracts and impairment of assets.

In a filing with Bursa Malaysia yesterday, the group said that it recognised a provision of RM750 million last year as one of the joint ventures (JVs) in the unlisted oil and gas portfolio will not be able to meet the repayment obligations for the loans.

"The group's attempt to nurture and enhance the value of these companies through various corporate strategies were dampened by the continued low oil prices. The group had previously provided financial guarantees for borrowings of these JVs and the financial guarantee contracts had been recognised based on their fair value at inception," it said.

The continued slump in the oil and gas industry affected the group's offshore and onshore businesses, with asset utilisation and daily operating rates of the oil rigs declining drastically than previously anticipated.

This led the group to carry out an impairment review of the affected assets and recognised a total of RM1.16 billion in impairment of assets last year.

Revenue for the quarter fell 26.8% to RM3.1 billion from RM4.2 billion a year ago due to the soft demand in the automotive industry, continued low oil prices and depreciating ringgit.

For the financial year ended Dec 31, 2016 (FY16), net loss widened to RM1.7 billion from RM37.2 million a year ago due to the impairments and provisions made last year, resulting in a pre-tax loss of RM2.2 billion in FY16 compared with a pre-tax profit of RM269.7 million in FY15.

Excluding the impairments and provisions for financial guarantee contracts, the group posted a pre-tax profit of RM89 million. The lower pre-tax profit was contributed by the operating losses of the oil and gas listed and unlisted segments.

Revenue for the year fell 24.1% to RM11 billion from RM14.4 billion a year ago as all business segments were adversely affected by the challenging economic and operating environment.

"With the proposed distribution of the oil and gas (listed) shares and exit of the unlisted oil and gas companies, the group will now focus on its remaining three core businesses namely automotive, equipment, and manufacturing and engineering.

"However, in the near term, the group's performance will still be affected by the downturn in the oil and gas industry and continued strengthening of the US dollar," it said.