Neptune Marine Services Ltd (ASX: NMS) today announced that, as reported to shareholders at its Annual General Meeting in November 2009, earnings for the first half of FY2010 will be well below that of the previous corresponding period.
This is largely due to a sharper than anticipated decline across both the US and South East Asian markets during the first half of this year, specifically the:
- Sudden and significant decline in drilling and exploration activity in the US due to very low
natural gas pricing in the domestic market.
- Cancellation/postponement of exploration budgets throughout most operating regions.
- Deferral of a large number of Inspection, Repair & Maintenance projects in SE Asia that
negatively impacted on vessel and ROV utilisation rates.
- Strength of the Australian dollar.
- Lower margins experienced due to deep discounting in some sectors.
As a result of these contributing factors, the company anticipates that normalised NPAT (net of noncash IFRS adjustments) for 1H2010 will be in the range of breakeven to a loss of $1m. Whilst this is a disappointing result in the short term, Neptune is confident of a strong turnaround in profit and earnings for the second half of FY2010 and into FY2011.
Neptune’s Managing Director and CEO, Christian Lange, said the company was encouraged by the evidence of improved trading conditions and prospects in all operating regions, which bodes well for the second half of FY2010.
"The overall softening of the macro market internationally has had a negative impact on margins and while we have had flow on effects of this into the second quarter we also anticipate a significant turnaround in profitability in the second half of FY2010 with market conditions in the US and Asia showing positive signs of recovery and improvement," he explained.
"Concurrently the Australian, Middle Eastern and UK markets continue to grow, both of our vessels have been contracted for new work, our level of offshore activity has increased considerably and we have a varied and robust collection of large, multi-year tendering opportunities in the pipeline. "Additionally, we also expect to benefit from the strength of our global footprint as we are well placed to secure new projects across a range of markets as opposed to relying too heavily on one."
Neptune recently reported that, in addition to its ongoing projects, it has secured approximately $50 million worth of new contracts since November 2009. The company also continues to make significant inroads into new and emerging markets including Qatar where it was recently awarded a three-year $20 million multi-services contract from Qatargas.
Mr. Lange said Neptune’s second half earnings would be further enhanced by the contribution of Submersible Technology Systems (STS) that was performing well. The company is also in the process of bolstering its senior management team to manage future growth.