Posted on August 27, 2009 - by musicwhiz

Swiber – 1H 2009 Financial Review and Analysis

Photo from Value Investment Blog

Swiber’s results were, frankly, not totally unexpected given the slump in the O&G segment since the spectacular fall in oil prices started to curtail spending on E&P by oil majors. However, since Swiber are responsible for the tail end work on most E&P projects, this means a lower chance of their contracts being cancelled (unlike what is happening at Cosco – a shipbuilder). The Company is also keeping a lower profile in terms of not overtly announcing new contract or LOI wins, even though it managed to chalk up new contracts of US$93 million in 2Q 2009, compared to just US$80 million in 1Q 2009. Instead, their IR Department seems to be going on overdrive in announcing details of tie-ups with regional partners, delivery of vessels and ongoing Management changes. While there is nothing overtly wrong with this, it does make one wonder – where are all the profits and cash going to come from eventually? I will address this and other issues in this analysis, but let me do the usual routine review and analysis of the three most important financial statement components first.

Profit and Loss Review and Analysis

Due to the fact that Swiber had completed just 4 projects instead of 6 last year, revenues dropped 11% from US$125 million for 2Q 2008 to US$111 million for 2Q 2009. Gross margin, however dipped from 25.9% in 2Q 2008 to 21.5% in 2Q 2009; while 1H 2009 gross margin also dipped from 25.9% to 20.9%. Contracts have been slow in getting secured due to the weakness in oil prices and also the fact that oil majors have begun holding back on their capex in light of the sharp downturn; and until clarity emerges on the horizon. Though at the time of writing, oil prices had risen sharply to a new 2009 high of US$74 per barrel, it remains to be seen if oil majors are willing to continue with their massive E&P spending plans. Read more…

Related posts:

1. China Fishery – 1H 2009 Financial Review and Analysis
2. Boustead – FY 2009 Financial Analysis and Review Part 1
3. Tat Hong – FY 2009 Financial Analysis and Review Part 2