Financials
Third Quarter Results Financial Statement And Related Announcement
Financials Archive
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THIRD QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2012
Profit & Loss
Review Of Performance
Financial performance review Q3 and 9M 2011-12
Revenue
The Group's revenue increased by 22% from S$87.7 million in Q3 FY2011 to S$ 106.7 million in Q3 FY2012. The increase in revenue was mainly due to revenue contributed from EPC project works and higher maintenance activities in Q3 FY2012.
Cost of sales
As a result of increase in revenue and cost pressures, the Group's cost of sales for production labour, subcontractors and materials increased by 48% from S$60.4 million in Q3 FY2011 to S$89.3 million in Q3 FY2012.
Gross profit and gross profit margin
The Group's gross profit decreased by S$9.9 million from S$27.3 million in Q3 FY2011 to S$17.4 million in Q3 FY2012 as a result of gross profit margin decreasing from 31% in Q3 FY2011 to 16% in Q3 FY2012.
The decrease in gross profit and gross profit margin was mainly due to:-
- Intensive pricing competition
- Cost pressure from business operation
- Completion of better margin project works in prior quarters
Other operating income
Other operating income increased by S$0.3 million from S$0.4 million in Q3 FY2011 to S$0.7 million in Q3 FY2012. This was mainly due to gain on disposal of assets and rental income.
Administrative expenses
Administrative expenses decreased by S$1.4 million from S$7.2 million in Q3 FY2011 to S$5.8 million in Q3 FY2012, mainly due to a decrease in provision for bonus incentive.
Other operating expenses
Other operating expenses increased by S$3.1 million from S$7.2 million in Q3 FY2011 to S$10.3 million in Q3 FY2012, mainly due to an increase in depreciation, employee welfare, freight forwarding and port handling fees, maintenance fees for production facilities and equipment in addition to a loss on exchange in USD and AED.
Finance expenses
Finance expenses decreased by S$0.2 million from S$0.3 million to S$0.1 million in Q3 FY2011 as a result of decrease in issuance of letter of credit, bank guarantees and performance bonds for project works.
Share of results of associates and joint-venture
Share of profit from associates of S$0.2 million in Q3 FY2012 was mainly due to share of results from PEI.
Share of profit from joint-venture of S$0.1 million in Q3 FY2012 was mainly a result of exchange adjustment arising from depreciation of Euro against SGD from Verwater Audex.
The project undertaken by Verwater Audex JV in the Netherlands was completed after the third quarter and the JV company has just concluded its negotiation with the client on a settlement for the outstanding project sum and variation claims. However, both Verwater and Audex (as subcontractors to the JV company for the above project) are currently negotiating with the JV company on the extent of works undertaken by each party for the project and consequently, their respective costs and share of the settlement sum. As at 31 March 2012, the amount due from the JV company to Audex was approximately S$18.3 million for which the Company has made a net provision of approximately S$11.2 million to date relating to this project.
Taxation
The effective tax rate of our Group increased from 15.2% in Q3 FY2011 to 20.3% in Q3 FY2012. This was mainly arising from changes in profitability for entities within the Group and tax rate differentiation for various foreign entities.
Profit attributable to shareholders and Non-controlling interest
The Group's profit attributable to shareholders decreased by S$8.3 million from S$9.6 million in Q3 FY2011 to S$1.3 million in Q3 FY2012 as a result of decrease in Group's gross profit in Q3 FY2012.
Balance Sheet Review
The increase in non-current assets by S$5.7 million to S$83.7 million in Q3 FY2012 was mainly due to investment in Fujairah facilities and scaffolding materials, motor vehicles and equipment.
The Group's current assets decreased by S$10.1 million to S$221.4 million in Q3 FY2012. This was mainly due to a decrease in cash and short term deposits offset by an increase in contracts-in-progress and trade receivables.
The Group's current liabilities decreased by S$5.7 million to S$88.3 million in Q3 FY2012. This was mainly due to the decrease in other payables and accruals, income tax payable offset by increase in provisions.
There was no significant change to the Group's non-current liabilities for FY2011 and Q3 FY2012.
Cash Flow Review
Cash used in operating activities for the Group in Q3FY2012 was S$25.1 million after deduction of income tax payment of S$9.0 million.
Net cash used in investing activities for the Group in Q3FY2012 was S$12.8 million. This was mainly attributable to investment of fabrication facilities and scaffolding materials, purchase of motor vehicles and equipment to support the on-going business operation.
The Group had used S$8.4 million in financing activities in Q3FY2012 which was mainly due to dividends paid to shareholders.
As a result of the above, there was a decrease in cash and cash equivalents of S$ 46.3 million from S$158.7 million in FY2011 to S$112.4 million in Q3 FY2012.
Commentary
The global economic outlook continues to be weighed down by financial uncertainties in Europe and the United States as well as the economic slowdown in China. This, together with keen price competition and rising costs, will continue to impact the Group's operating margins in 4QFY12.
However, PEC remains cautiously optimistic on the demand for energy and petrochemical-related products in the medium to long term.
The Group remains selective in its bids and will continue to pursue viable opportunities in the region as well as in the Middle East while maintaining its high safety standards and quality service to its customers.
As at 31 March 2012, the Group's order book was S$246 million, excluding on-going maintenance contracts.
Balance Sheet
