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BH GLOBAL MARINE LIMITED
ANNUAL REPORT 2012
The Group has also recorded a loss from discontinued
operations, net of tax, of S$32.7 million for FY2012. Of the
amount, S$10.1 million arose from impairment of fixed assets,
inventory and deposit for purchase of land in Batam. Loss from
operations amounted to S$17.6 million. A further recognised
loss of S$5.0 million arose from the depreciation of the
Indonesian Rupiah against the Singapore Dollar.
This translated to a loss per ordinary share of 5.57 Singapore
cents for FY2012 (FY2011: basic earnings per ordinary share
of 2.69 Singapore cents).
FY2012: A CHALLENGING YEAR
The general marine market remains weak and global
uncertainties in the macro environment add on to the worries.
Order flows for new marine vessels are diminishing and yards
are faced with pricing pressure to maintain competitiveness and
market share. This is even more challenging for downstream
service providers like us.
The situation was further aggravated by our venture in Batam,
Indonesia. The Group’s subsidiary, PT BH Marine & Offshore
Engineering (“PT BHE”), entered into an agency agreement on
13 January 2011 for the procurement of rights of usage over
30 hectares of land in Batam, Indonesia. The final completion
of the approval process was rejected by the relevant authority
in Batam and PT BHE was unable to acquire the use of the land
remain as a shipyard despite having advanced approximately
S$2.7 million to the agent. Subsequently, the Group decided
to withdraw from the Batam land acquisition as the targeted
land had been allocated by the relevant authority in Batam
to another party. Simultaneously, the Group also discovered
potential irregularities in some transactions involving the
subsidiary.
It is regrettable that the plan to expand the land area and
capacity of our fabrication yard in Indonesia’s Batam island
did not pan out as intended. Nonetheless, we are taking
active steps to resolve all the outstanding matters involving
the subsidiary. We have sought legal advice and have taken
appropriate actions, including steps to recover the deposit
advanced to the agent for the land acquisition and reorganise
the management of the affected subsidiary. The Group has
also decided to discontinue its engineering and fabrication
services which were conducted by the affected subsidiary and
seek to divest its remaining assets.
MOVING FORWARD
The general marine industry remains demanding. The
unattractive Baltic Dry Index deters ship owners and operators
from placing new shipbuilding orders with shipyards. Banks
remain cautious in extending financing facilities to the
shipbuilding industry. Anticipating this situation, BH Global
set out on a vertical integration strategy to branch into both
downstream (Manufacturing) and upstream (Engineering
Services) in 2010/2011. This allows the Group to tap on
different pockets within the value chain and enhance the
Group’s ability to provide turnkey services to our customers.
The Group will redeploy its focus on our core competencies
in the Supply Chain Management business. The Supply Chain
Management Division contributed 65% to the Group’s revenue
and remained profitable in FY2012. We will continue to secure
new agency rights from renowned principals and further
expand our sales support network overseas.
Construction of the manufacturing plant in Oman is progressing
smoothly and is expected to commence production by 2Q2013.
Depending on demand, we will increase the production capacity
gradually. Our Engineering Services Division has completed a
major EPCM project in 4Q2012, which saw the delivery of a
FPSO vessel for a major customer. We are in negotiations with
various customers to secure new contracts.
In addition, the Group has identified the key areas of concern
and will be taking a series of measures to resolve the issues at
hand. We are enforcing tighter controls over project execution
at the subsidiary level under Engineering Services Division. To
better manage foreign exchange risks, the Group is exploring
various hedging structures and will work with customers on a
contractual value range beyond which it will be subjected to
renegotiation.
RETURNING VALUE TO STAKEHOLDERS
I wish to take this opportunity to thank shareholders who
continue to stand by us through the ups and downs of our
business. Therefore, despite a challenging year, we are pleased
to propose a first and final cash dividend of 0.5 Singapore
cents per ordinary share (one-tier tax exempt) for FY2012 to
reward our shareholders.
On a final note, I would also like to express my gratitude and
appreciation to our board of directors, management team,
employees, customers, vendors and other stakeholders for
their continuous support.
Thank you.
Alvin Lim Hwee Hong
Chairman
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