Eversendai heading towards calmer waters

KUALA LUMPUR (Nov 27): Steel and construction firm Eversendai Corp Bhd, which is looking to expand its operational presence in the UK and Australian markets, is anticipating “positive” results in its upcoming third quarter financials, that is due to be released this week.

Executive chairman and group managing director Tan Sri AK Nathan said the group targets to bounce back with better performance and improved results driven by the good number of projects and reasonably-sized projects in the order book. Eversendai returned to profitability in the first half of the year after a loss-making year in 2016.

“Last year was already past but we should look at the first two quarters [in the current financial year]. We have been showing profits. We have gone through some challenges but going forward it’s a positive number.

“My approach going forward is to show a quarterly profit — that’s my target. I’m working towards it and our third quarter [ended Sept 30] announcement will be positive,” he told The Edge Financial Daily in a recent interview.

Eversendai booked a net profit of RM35.9 million in its first half ended June 30, 2017 (1HFY17), versus a net loss of RM71.7 million recorded during 1HFY16. However, the group’s oil & gas (O&G) segment is still loss-making with a pre-tax loss of RM2.5 million in the period, mainly due to low utilisation of its fabrication plant.

For its financial year ended Dec 31, 2016 (FY16), Eversendai reported a net loss of RM257.5 million on a revenue of RM1.57 billion. A substantial portion of the losses was due to an RM101.7 million write-down on impairment costs from its venture in Singapore-based Technics Oil & gas Ltd, which Nathan has described as a “mistake”.

This year, the group’s operations in the United Arab Emirates (UAE) continued to dominate revenue contributions, making up RM485.9 million of the top line. Meanwhile, the Malaysian operations only contributed 11.4% of the revenue in the same period.

Overall, the O&G sector contributed nearly 16% to the total revenue of 2QFY17 while operations in the Indian subcontinent contributed almost 14% of the group’s revenue, while the remaining revenue came from operations in Singapore and Thailand.

To date, Eversendai has 10 regional offices with a workforce of almost 15,000 personnel and an impressive portfolio of more than 300 accomplished projects in over 14 countries in Southeast Asia, the Middle East and India. It also has five steel fabrication factories in Malaysia, Dubai and Sharjah in the UAE, Qatar and India, with an annual capacity of 150,000 tonnes.

“At the present, we work in 10 different countries and next year I won’t be surprised if we add on our 11th and 12th [new] countries,” said Nathan, 62, who is also the founder of Eversendai.

Now that the company has a strong footing in Southeast Asia, the Middle East and India, it is now venturing into the UK and Australian markets.

The structural steel turnkey contractor said its projects in the Middle East are thriving well and activity in India is picking up.

“We’’re moving into a few countries, not Southeast Asia but we’re looking into the UK and Australian markets,” he said, adding that the company was undertaking projects which fit with its portfolio.

“We’re not doing anything new as we’re really focussing on our core capability. Usually, from the core business, we get more projects.

“We want to expand into countries where the currency is much stronger than Malaysia’s, so that we would be able to get an overall good balance, [and] it will be reflected in our revenue and profit,” he said.

Recently Eversendai’s wholly-owned subsidiary, Eversendai Offshore RMC FZE, bagged RM180 million worth of new projects, mostly in UAE, including a major offshore fabrication job from Saudi Aramco.

With these, the group’s order book currently stands at about RM2.3 billion, with RM1.56 billion worth of work secured year to date.

As of June 30, 2017, projects from the Middle East made up 46.3% of the order book while 20.5% came from Malaysia. India makes up 21.7% and the remaining 11.5% is from the O&G segment.

For the construction sector, Nathan said there is a number of projects being mooted in Malaysia, especially with the recent Budget 2018 announcement.

“It’s positive. There are a lot of opportunities for construction companies. We need contractors to execute it [the projects], so contractors will benefit.

“As long as the procurement process is all fair and the jobs are awarded to reliable contractors, I would say that the construction business will strive for the next few years,” he said, adding that the local contractors would definitely benefit from this.

This article first appeared in The Edge Financial Daily, on Nov 27, 2017.

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