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Dear Shareholders,
As oil prices continue to hover
around US$45 to US$55 range,
we see global exploration and
production expenditure by major
oil and gas companies continue
to remain conservative in giving
approvals for new projects. We also
begin to see some companies in the
local oil and gas sector addressing
concerns on operating issues and
undertaking financial restructuring
and consolidation. While Dyna-Mac
has cash and bank balances of S$69.5
million as at 31 December 2016, we
have posted a higher net loss of S$15.7
million as compared to S$5.2 million in
2015.
The net loss was attributable mainly to
two factors.
First, we experienced lower gross
profit mainly due to slower progress in
construction which in turn was caused
by delays in receiving engineering
drawings and free-issued materials
from one of our customers in the
previous project. This was coupled
with fixed direct overheads carried by
idle facility in our yard in Malaysia.
Secondly, there was a S$11.3 million in
write-off of certain long outstanding
debts, S$5.6 million impairment of
goodwill relating to the operations in
China, and S$11.1 million impairment of
non-movable fixed assets due to the
idle facility in yard in Malaysia.
Excluding these one-time write-off of
S$28.0 million, Dyna-Mac would have
registered a net profit of S$12.3 million
for 2016.
Group revenue was S$204.0 million
in 2016, while gross profit was S$41.8
million with net loss at S$15.7 million.
Dividend
While we constantly strive to reward
our shareholders with a sustainable
and consistent dividend, we are also
mindful of the need for long-term
sustainable growth for the Group.
In view of the challenging market
environment coupled with the need
to conserve cash for the future, the
Board of Directors viewed it prudent
not to recommend a dividend for the
financial year ended 31 December
2016.
Review of Business Operations
The Group registered a 24.3 per cent
decline in revenue from S$269.5
million in 2015 to S$204.0 million in
2016. A total of two small size projects
were awarded and four projects were
completed and delivered to customers
in 2016. Three projects were carried
out in our yards in Singapore while
one project was carried out in our yard
in Malaysia. Our facility in our yard in
Malaysia was under-utilized which
in turn was caused by low volume
of work awarded by our clients as
international market is not seeing
many new projects.
In 2016, a total of 28 topside modules,
18 pipe racks, one turret assembly unit,
one flare tower and one skid were
completed and delivered to owners.
These comprised five modules for
FPSO Kraken, six modules for Block
15/06 East Hub Development, and 11
modules, two pipe racks, one turret
assembly unit, one flare tower and
one skid for FPSO Catcher. We also
delivered six modules for the Zadco
UZ 1M Enabler Project and 16 pipe
racks for Singapore Jurong Cogen
Project.
We are actively looking at ways to
lower cost and increase production
quality and efficiency by looking
at automation and streamlining
certain production processes.
We will continue to right-size the
company in terms of manpower
and facilities, to cater to the
current level of available projects
in the market. We believe with the
dedication and determination of all
our employees, our biggest asset,
we hope to be able to emerge
stronger and better after this phase
of downturn.
Our Chairman and Chief Executive Officer, Lim Tze Jong
DYNA-MAC HOLDINGS LTD.
2016 ANNUAL REPORT
06
CEO’s LETTER
TO SHAREHOLDERS