Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Seamec Ltd (BOM:526807, Financial) achieved a 95% utilization rate for three of its vessels during the quarter.
- EBITDA for the quarter increased by 33% year-on-year, driven by improved rates and the sale of an unprofitable vessel.
- The company reported a 59% growth in profit after tax on a consolidated basis, excluding exceptional income.
- Seamec Ltd (BOM:526807) has a strong financial health with a net cash surplus of INR92 crores after adjusting borrowings.
- The company is strategically positioned to leverage India's growing energy demands, supported by a fleet of specialized vessels and skilled crew.
Negative Points
- Revenue for the quarter remained flat year-on-year at INR223 crores, with a 7% decline on a quarter-on-quarter basis.
- Fuel costs remain a concern, particularly for EPC jobs, which are borne by Seamec Ltd (BOM:526807).
- The company paid INR26 crores in advisory fees to a promoter company, which is about 15% of the FY24 PAT, raising concerns about cost rationalization.
- The UK subsidiary reported an INR18 crores PAT loss, attributed to interest and depreciation charges on a property under construction.
- There are ongoing issues with the delivery of a second OSV, which could impact future operations and revenue.
Q & A Highlights
Q: Sir, you have mentioned in previous calls that fuel charges are borne by the chartering firms like ONGC, but when I look at your annual report about 8.2% of our top line for FY24 was fuel expenses. How to reconcile this?
A: The reason for this is that when the vessel is chartered purely, the charter pays for the fuel charges. However, when we are executing an EPC job, the fuel is on our account. This fuel cost is coming up on that account and it is for that particular project.
Q: In FY24, the company paid out INR26 crores of advisory fees to a promoter company called MMG Advisors. What services does MMG Advisors provide, and why does Seamec need external advisory after so many years of successful operation?
A: Our Chairman is a Non-Executive Chairman but instrumental in setting up this business. The advisory fee is for shared services at the group level, including finance, HR, and corporate management. This management fee was also charged earlier by Technip when they owned Seamec.
Q: You have invested INR55 crores of equity and INR150 crores of loan for the UK subsidiary. What assets were purchased using this amount, and why is there an INR18 crores PAT loss?
A: The subsidiary in the UK was set up to expand our business horizons in Europe. The company invested in purchasing a property for a global office. The loss happened because the property was under construction, and there was interest and depreciation charged into that asset.
Q: Are there any changes in our contract with ONGC, and are we going to reprice our ships?
A: Repricing of ships will take place as and when the existing contracts get over and new contracts come in. This is an ongoing phenomenon, and it continues like this every year.
Q: How much CapEx was deployed for NPP Nusantara, and what kind of revenue potential can we expect?
A: The deal for NPP Nusantara has been inked at around $24 million, with 5% paid as an advance deposit. The vessel has good potential due to its age and is already working in Indian waters. We are confident that a five-year payback will be achieved once Nusantara is acquired.
Q: What is the status of the second OSV that we purchased?
A: There was an agreement to purchase the second OSV, and we are talking to the seller for the delivery of the vessel. There are some issues going on for that vessel to be delivered, which we are trying to sort out.
Q: Regarding the debt situation, do we plan to maintain a cash surplus position going forward?
A: The current cash position is very strong, and we believe that we will generate reasonably good cash flows. We have committed some CapEx for FY25-26, including Nusantara, and will look for similar opportunities to deploy these cash flows.
Q: Can you explain what CapEx you are planning in the next two to three years, and what is the funding mix for that?
A: One CapEx for sure is the acquisition of Nusantara for $24 million. We have healthy cash positions and would be looking for acquiring more fleets. Most of it will be funded from internal accruals, and any additional debt taken will be repaid in the coming years.
Q: How is the revenue contribution likely to be from other customers, other than ONGC?
A: Opportunities are coming up in both international and domestic waters. We will tap the more profitable opportunities, and some shift may happen from ONGC. However, we do not see any concentration risk as our vessels and crew are experts in the area.
Q: What are the current deployment days and the average day rate for the quarter?
A: Deployment and rates keep changing depending on the nature of work and the type of contract. As an investor, you need to look at whether we are able to improve our bottom line and continue to grow the company, which is our endeavor.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
