Wintermar Offshore (WINS:JK) Reports FY2020 Results

Wintermar Offshore Marine (WINS:JK) has reported results for the full FY2020, achieving a gross profit of US$1.1 million, turning around from a gross loss of US$1.27 mil in FY2019, as utilization rose to 66% in Q42020. The rise in vessel utilization provided a boost to revenue of US$11.9 million for 4Q2020, and brought the Company back to a gross profit for the full FY2020.

A strong 4th quarter saw high-tier vessel utilization reach 77% as several drilling projects commenced. Although revenue for FY2020 was 23% lower than FY2019, the significant cost control measures in the past year brought total direct expenses down by 26% YOY.

–Owned Vessel Division

As oil prices stabilized, there was a recovery in drilling activity in 4Q2020, particularly benefitting the high tier fleet which saw utilization jump to 77% for the final quarter. This boosted Owned Vessel revenues by 24.4% QOQ to US$9.1million in 4Q2020.

Overall fleet utilization for FY2020 was 63% which was similar to FY2019. Total Owned Vessel revenue for FY2020 was US$33.8 million, a YOY decline of 18% compared to FY2019. However, the fleet streamlining and cost control measures implemented by management for the past year have borne fruit as reflected in a 23% decline in Owned vessel direct expenses at US$ 34.0 million. Vessel sales over the past year and asset impairment contributed to lower depreciation of US$14.8 million in FY2020 compared to US$23.4 million in FY2019. Crew costs were 10% lower YOY at US$9.0 million while fuel costs fell 22% YOY to US$2.3 million. Operational costs, however, increased 21% YOY to US$4.9 million primarily due to COVID-19 related costs and mooring costs when the vessel is idle.

–Chartering and Other Services

Chartering activity was affected by COVID-19 and revenue for this division declined by 34% to US$7.4 million. Gross Profit from Chartering fell to US$0.7 million for FY2020 compared to US$1.2 million in FY2019.

–Indirect Expenses and Operating Loss

Indirect Expenses declined by 23% YOY to US$5.8 million for FY2020, largely contributed by a lower headcount of 141 at the end of December 2020 compared to 172 staff the year before, and a voluntary salary reduction led by the Directors of the Company and supported by the participation of all employees to help the Company through the COVID-19 pandemic. Staff salary was 20% YOY lower at US$3.6 million compared to US$4.5 million in the previous year. Other reductions were seen in Professional fees which fell by 38% to US$0.4 million, marketing and travelling which fell by 68% and 54% respectively due to the travel restrictions imposed for COVID-19. Office depreciation fell by 53% to US$0.14 million as certain equipment was fully depreciated.

The Operating Loss nearly halved to US$4.7 million for FY2020 compared to US$8.8 million in FY2019.

–Other Income, Expenses and Net Attributable profit

As the Company has reduced overall bank debt by US$8.5 million to US$46.1 million by end of December 2020, the interest expenses saw a sharp decline of 26% YOY to US$3.5 million. However, this was offset by a loss from equity in associates of US$1.6 million for the year compared to a profit of US$1 million in FY2019. Profit from sale of fixed assets was US$1 million, arising from the sale of 5 vessels and a building in 2020. This was lower than the profit of US$2.2 million from the sale of 5 vessels in FY2019.

Net loss attributable to shareholders narrowed by 7.4% to US$12.3 million for FY2020, compared to a net loss of US$13.3 million in FY2019.

EBITDA for FY2020 was US$10.3 million, compared to US$14.9 million booked in FY2019.

–Oil & Gas Industry

COVID-19’s disruptive effect on the world in 2020 caused an unprecedented impact on oil demand. Traffic literally came to a standstill in 2Q2020 when most countries restricted travel and movement to stop the transmission of COVID19. As a result, there was demand destruction of 9.9 million bpd of oil in 2020, or about 10% of global output, causing inventory buildup and dampening oil prices.

Investment in upstream oil and gas, which had already seen a multi-year decline, continued to fall further by 20%, in 2020 as seen in the above chart.

Now that most major countries are targeting to reach a 50% vaccination rate by end of 2021, oil demand has picked up as economies started to open up in 2H2020. The global economic recovery resulted in most of the crude oil inventory being drawn down, bringing a balance to the supply and demand for oil again. Oil prices are expected to trend higher as oil demand will benefit from economic recovery in many major world economies in 2H2021 and 2022.

–Offshore Vessels

COVID-19’s disruptive effect on the world in 2020 caused an unprecedented impact to oil demand. Traffic literally came to a standstill in 2Q2020 when most countries restricted travel and movement to stop the transmission of COVID-19. As a result, there was demand destruction of 9.9 million bpd of oil in 2020, or about 10% of global output, causing inventory buildup and dampening oil prices.

Investment in upstream oil and gas, which had already seen a multi-year decline, continued to fall further by 20%, in 2020 as seen in the above chart.

Now that most major countries are targeting to reach a 50% vaccination rate by end of 2021, oil demand has picked up as economies started to open up in 2H2020. The global economic recovery resulted in most of the crude oil inventory being drawn down, bringing a balance to the supply and demand for oil again. Oil prices are expected to trend higher as oil demand will benefit from economic recovery in many major world economies in 2H2021 and 2022.

–Offshore Vessels

Last year at this time, the COVID-19 pandemic interrupted the seeds of optimism in the offshore vessel industry and caused suspension and even terminations in drilling projects. As the outlook for oil prices improves, the demand for offshore vessels is also starting to recover, with more tenders and projects in the pipeline. Rystad Energy is projecting a recovery in offshore capex starting in 2022 as seen in the chart below. This would bode well for the OSV industry which is starting to benefit from more work, albeit still relatively short term. With stronger oil prices, there is already a recovery in offshore drilling so far in 2021 with more demand for higher tier vessels in various markets. Some high tier vessels which had been seized by banks are being transacted in the first quarter of 2021, signalling optimism in the OSV industry after many years of downturn.

–Strategy and Outlook

There are more signs of OSV industry recovery, not just due to a turnaround in the oil and gas sector, but also due to increased investment in offshore windfarms. There have been several drilling projects due to start in Indonesia which were delayed due to various factors like rig repair or inability to secure suitable vessels, proving that specific vessel segments are already seeing good demand. Although 2021 is likely to see some volatility and charter rates are still low, the trend for OSV demand looks positive. Management is optimistic that 2022 will be a better year and are positioning to tender for contracts in several markets. The Company has also started to work in the offshore wind industry for the first time with a short contract to transport monopiles for wind turbine construction.

The streamlining of the Company’s fleet by selling out of low tier vessels has led to a lower cost structure as the focus is now on mid and high tier vessels which comprise 73% and 22% of our fleet at the end of 2020. Other initiatives to digitalise our internal HR and Logistics procedures through digital processes were accelerated by the pandemic last year. This has already resulted in operational efficiencies and a reduction of paper use, and lower travelling costs as virtual meetings and vessel inspections became the new normal.

After paying down US$8.5 million of debt over the past year, the Company ends 2020 with a healthy balance sheet with low net debt/equity of 35%. Management has successfully negotiated to extend loan maturities until 2025, which provides a comfortable cash flow profile for the coming years. With the emphasis on keeping up the quality of services and fleet, Wintermar is poised to take a strong position in the coming industry recovery.

Contracts on hand as of the end of February 2021 amount to US$66 million.

About Wintermar Offshore Marine Group

Wintermar Offshore Marine Group (WINS.JK), developed over nearly 50 years with a track record of quality that is both a source of pride and responsibility that we are dedicated to upholding, and sails a fleet of more than 48 Offshore Support Vessels ready for long term as well as spot charters. All vessels are operated by an experienced Indonesian crew, tracked by satellite systems and monitored in real-time by shore-based Vessel Teams.

Wintermar is the first shipping company in Indonesia to be certified with an Integrated Management System by Lloyd’s Register Quality Assurance, and is currently certified with ISO 9001:2015 (Quality), ISO14001:2015 (Environment) and OHSAS 18001:2007 (Occupational Health and Safety). For more information, please visit www.wintermar.com.

Ms. Pek Swan Layanto, CFA
Investor Relations
PT Wintermar Offshore Marine Tbk
Tel +62-21 530 5201 Ext 401
Email: investor_relations@wintermar.com

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