KUALA LUMPUR, 27 May 2021 - Deleum Berhad (“Deleum” or the “Group”), a provider of diverse range of supporting specialised products and services to the oil and gas industry, saw its pre-tax profit improved significantly to RM9.1 million for its first quarter ended 31 March 2021 (Q1FY2021) from RM4.1 million in the corresponding quarter of 2020. This was despite a 36.5% lower revenue of RM96.1 million compared with the previous corresponding quarter.
The Group’s higher profit was due to improved operating margins recorded across all business segments on an account of better sales composition and lower operational costs. Various cost savings initiatives undertaken by the Group, a favourable Ringgit/US Dollar foreign exchange movement, and the absence of impairment for doubtful debts as compared to the corresponding quarter of 2020 were among the contributory factors of the higher profit.
The decline in revenue was a result of the lower sales activities by the Power and Machinery and Integrated Corrosion Solution segments. These were mainly due to the slowdown in the maintenance activity levels on both Maintenance, Construction and Modification services and the Sponge-Jet Blasting businesses in the Integrated Corrosion Solution segment coupled with the decline in the aftermarket turbomachinery maintenance services within the Power and Machinery segment.
Segmental Performance
Pre-tax profit for the Group’s Power and Machinery (P&M) segment rose 13.9% to RM7.2 million from RM6.4 million in the last corresponding period despite the lower revenue recorded. This was attributed to the stronger operating margins earned from the better sales mix and lower operational costs as well as a favourable movement in foreign exchange differences.
The Oilfield Services (OS) segment saw a turnaround in results with a profit of RM0.6 million after an impairment of a trade receivable dragged it into the red in the corresponding quarter, resulting in a loss of RM1.3 million. The segment’s revenue rose marginally by 0.8% to RM27.9 million against the corresponding quarter of RM27.7 million. The higher revenue was due to the increase in the activity levels of jobs performed from well intervention and enhancement services in East Malaysia coupled with higher sales on the gas lift valve services.
The Integrated Corrosion Solution (ICS) segment turned in a profit of RM0.2 million against the corresponding quarter loss of RM1.4 million as a result of better operational margins earned from better sales mix and lower operating expenses. The segment’s revenue fell by 68.6% to RM8.2 million compared against the corresponding quarter revenue of RM26.1 million in view of overall lower contract orders and job deliveries in its Malaysian operations. The decrease was however mitigated by the stronger performance of the Sponge-Jet Blasting business in Indonesia.
Prospects
The COVID-19 situation continues to overshadow the economy as the Malaysian Government imposed the third Movement Control Order to curb the spread of the virus. Hence, most economic activities are expected to be slow.
The ongoing situation will inevitably have a negative impact on Deleum’s businesses. Deleum remains committed in ensuring businesses remain sustainable and stakeholders’ value preserved under such volatile environment. The Group will continue its operations and costs optimising initiatives throughout the financial year 2021.