Very good evening, ladies and gentlemen. Thank you for joining us for MISC's analyst briefing for the first quarter of FY 2025. I am Faizan from the Investor Relations team. We are pleased to be joined today by Encik Zahid Osman, President and Group CEO, who is with us today via call, Encik Raja Azlan Shah Raja Azwa, Chief Strategy and Sustainability Officer, and Encik Afendy Ali, Chief Financial Officer. Before we proceed, I would like to bring your attention to the disclaimer slide. This presentation contains some forward-looking statements with reference to our plans and expectations, whereby actual results could differ due to unknown risks, uncertainties and other factors that are, in many cases, beyond MISC's control. To start the session, I would like to invite Encik Zahid, our PG CEO, for his opening remarks and the quarter's key highlights and business updates. Encik Zahid?
Thanks, Faizan. [Non-English content ], and good evening, everyone. Thank you for making time to join us for this quarter one analyst briefing. I certainly appreciate your continued interest in MISC, and I look forward to the opportunity to update you on our first quarter performance, and then the team will also continue sharing with you in terms of the market outlook. We had a good start to quarter one this year. We continue to demonstrate a strength amid evolving market dynamic as we maintain profitability and delivered strong earning quality, a reflection of our solid fundamentals, business model, as well as our focus on long-term value creation. Our group operating profit improved both quarter-on-quarter and year-on-year, driven by strong uplift in the Offshore segment and stable performances in our cost, other core businesses during the quarter.
The Offshore segment delivered a strong performance in Q1 including cash flow contributions from FPSO Mero 3 following a transition from development into the operational phase. As part of our commitment to deliver value to the shareholder, I am pleased to inform you that we have declared a first interim dividend of MYR 0.08 per share, amounting to a payout of MYR 357 million. In terms of strategic focus, we continue to execute our priorities in line with our MISC 2030 Ambition, Delivering Progress strategy, delivering meaningful progress across both the Resilient Core and as well as the decarbonization pillars. On Resilient Core, during the quarter, we secured a long-term VLEC, Very Large Ethane Carriers with PTT to strengthen our gas asset solutions business segment. Heavy Engineering segment won a new EPCIC contract with Sasol.
In the Offshore segment, we are actively pursuing new opportunities with many ongoing participation in tenders across Southeast Asia as well as other markets. In terms of decarbonization, our petroleum and product segment indeed entered into an agreement with Fleetzero to co-develop the world's longest-range hybrid electric vessels. This is very exciting. It is marking a key step in our entry into maritime decarbonization. On ESG front, AET was recognized during quarter one with the Maritime SG LowCarbon50 Award. We affirm our leadership in sustainable shipping innovation. We look ahead, the external environment going to remain challenging. There are many factors that are affecting the outlook for our industry. Geopolitical tension, trade realignments, U.S. tariff uncertainties, protectionist trade measures, stricter maritime regulation and rising cost pressures. Despite these headwinds, our focus remains clear to move energy with less emission, guided by our Delivering Progress strategy.
We particularly want to focus on three areas. The first one is disciplined growth with strategic clarity. We continue to grow selectively, guided by our capital discipline and long-term strategic alignment with investments focused on near-term earnings potential and long-term value creation, particularly in energy transition enabling new energy assets. The second area is on operational resilience and consistent returns. We remain committed to operational excellence, focusing on asset performance, cost leadership, and contract reliability to ensure consistent, sustainable returns to our shareholders. The third area is on future-proofing the portfolio through innovations and partnerships. The plan is that through partnerships, digitalization, and low-carbon initiatives, we are building a future-ready MISC aligned with regulatory shifts, the customer's changing needs, as well as aiming to deliver our MISC 2030 Ambition.
We certainly believe with the Delivering Progress strategy, MISC is well-positioned to navigate the challenges and capture opportunities to deliver long-term value to all stakeholders. I think in closing, I am certainly very pleased with what we have delivered in quarter one. The outlook is still positive, even though there are many challenges coming our way. I think I would like Raja Azlan and Afendy later on to share with you in more details about financial as well as the market outlook. Now let me hand it back to the team to walk you through the Q1 2025 performance in greater details. Thank you.
Thank you, Encik Zahid. Next, we'll have a presentation on financial performance by Encik Afendy. Encik Afendy.
Thank you, Faizan. Okay, ladies and gentlemen. In the next few minutes, I will walk through the financial performance and highlights for the quarter for MISC Group. In quarter one 2025, the group revenue stood at $633 million, which represents a decline of 18% year-on-year from $771 million in quarter one 2024, and a drop of 16% quarter-on-quarter from $763 million in quarter four 2024. The decline against both corresponding and preceding quarter was primarily attributed by Marine & Heavy Engineering segment, where several ongoing projects are nearing completion, which led to reduced activity and therefore a decrease in revenue for the quarter. Meanwhile, newer projects are still in the early stages of execution and have yet to contribute meaningfully to the top line.
Additionally, our gas segment also experienced a revenue decline, largely due to softer freight rates, lower earning days from contract expiries, and vessel disposals. Despite lower revenue, the group delivered a strong operating profit of $193 million in quarter one 2025. With a marginal increase of 3% compared to $157 million in quarter one 2024, and more than double the operating profit of $89 million recorded in 2024. Comparing against both comparative quarters, the higher profit was primarily driven by a one-time gain arising from the commencement of a new FPSO lease contract in the offshore segment, which contributed positively to the operating profit in the current quarter. Meanwhile, the quarter-on-quarter increase was further supported by the higher operating cost related to the receivables impairment in gas segment in the preceding quarter.
For our profit or loss after tax, in quarter one 2025, we posted a profit after tax of $160 million, which was comparable to quarter one 2024. A significant turnaround from the loss of $91 million in quarter four 2024. The primary driver behind the movement against the preceding quarter was mainly due to the higher impairment provision in gas segment in quarter four 2024. Excluding the one-off impairment, both quarters, i.e., quarter one 2025 and quarter four 2024, the group profit after tax is higher by more than double in line with the operating profit increase as mentioned earlier. Cash flow from operation. The year-on-year improvement on cash flow from operation, CFFO, in current quarter by $133 million as compared to the corresponding quarter were driven by lower payments to creditors, largely from the offshore and Marine & Heavy Engineering segments.
The cash flow from operations was down 52% for $192 million from $366 million in quarter four 2024, mainly due to lower collections from clients in Marine & Heavy Engineering segment, coupled with higher payments to the creditors within the offshore base segment. In respect of our balance sheet and gearing, as of March 2025, the group's balance sheet remains stable with only marginal movement in total assets, equity, and liabilities compared to December 2024. The group's gearing ratio increased to 0.44 x due to higher debt balance. The net gearing ratio remained unchanged as the increase in debt was offset by a corresponding increase in cash balance. The additional drawdown in the current quarter were mainly comprised of the floating rate debt, hence resulted in the changes in the debt composition mix.
For our cash and debt balances, as mentioned earlier, both cash and debt balances as of March 2025. Next slide please. Both our cash and debt balances as of March 2025 were higher as compared to December 2024 following the additional drawdown of borrowings in the current quarter. Next. Now I'll walk through with you the business segment performance. For gas, the revenue declined to $143 million with 26% lower quarter-on-quarter and 30% lower year-on-year. This was mainly due to lower earning days from contract expiries and vessel disposals, coupled with softer freight rates. Despite the softer top line, our gas operating profit rose sharply by 63% quarter-on-quarter to $68 million, driven by the higher operating cost due to the receivables impairment in quarter four 2024. Year-on-year, operating profit declined by 11% in line with the lower revenue.
Profit after tax from gas rebounded to $47 million, a significant turnaround from the loss of $128 million in quarter four, which was impacted by the impairment of the older LNG vessels, which we have mentioned in the previous quarter. Compared to quarter one 2024, profit after tax was lower by 26%, consistent with the low operating profit. Petroleum segment remains stable as revenue and operating profit were comparable against both corresponding and preceding quarter. Profit after tax, however, softened to $65 million, down 13% from quarter four 2024, driven by the reversal of tax provision in the preceding quarter and 11% lower year-on-year, largely due to a one-off gain from vessel disposal in quarter one 2024.
For our offshore segment in quarter one 2025, the group saw a significant uplift in OBU business segment with a revenue of $115 million, increased 20% quarter-on-quarter, underpinned by the commencement of a new FPSO lease contract. Meanwhile, the revenue was comparable against quarter one 2024. Correspondingly, operating profit surged to $59 million, a turnaround from the loss recorded in quarter four 2024 and posting a robust 89% growth year-on-year. Profit after tax improved significantly to $47 million from a loss of $43 million in preceding quarter and $5 million of profit in the corresponding quarter.
For our Marine & Heavy Engineering segment, as mentioned earlier, the revenue declined sharply to $100 million, declined 46% quarter-on-quarter and 51% year-on-year, mainly due to the phasing of key projects nearing completion and the newer ones still at early stages. Operating profit was at $4 million, down from $6 million in quarter four 2024 to a slightly over quarter one 2024 profit of $3 million, driven by successful close-up of post-survey projects upon the achievement of key milestones. Correspondingly, profit after tax stood at $3 million, a decrease from quarter four 2024, but marginally higher when comparing year-on-year. That is all that I have for today's financial performance for quarter one 2025, and I'll pass the floor back to Faizan.
Thank you, Encik Afendy. Thank you very much. Next, I would like to invite Encik Raja Azlan for his presentation on market environment. Encik Raja Azlan.
Thank you, President. Assalamualaikum and a very good evening to the audience. In terms of the outlook, in the LNG shipping segments, spot rates across all vessel classes are expected to remain subdued throughout 2025. Mainly due to an oversupply of new build deliveries and delays in new liquefaction projects. However, the market is expected to begin recovering from 2026 onwards as new liquefaction capacity gradually comes online. This rebalancing of supply and demand is anticipated to benefit modern vessels like the dual fuel or the tri fuel and the X-DF and ME-GI vessels, which are likely to command better rates over the medium term. While modern vessels are better positioned for recovery rates, for rates for older steam turbine vessels are expected to decline, though they continue to serve legacy contracts and niche routes.
MISC remains focused on our fleet rejuvenation strategy, timely delivery of ongoing projects, and optimizing vessel usage, including the redeployment and repurposing of our vessels into floating storage units. With the scheduled delivery of 21 new build vessels by 2028, our gas segment will operate either directly or indirectly a fleet of about 33 modern and efficient non-steam engine vessels, and this includes the 12 existing vessels. Next slide, please. The FID outlook on the liquefaction capacity remains positive in 2025, 2026, despite the Trump tariff policies. Despite ongoing trade and policy uncertainties, we believe that the outlook for new LNG project approvals remain positive. While no FID was recorded in the first quarter 2025, some key LNG projects in the U.S. have reached significant milestones and received approvals.
The FID outlook for 2025 and 2026 remains positive with projected volumes expected to exceed 100 million tons per annum, reflecting a rebound in delayed projects as market fundamentals improve. This is also supported by the U.S. ending its pause on LNG export permits. However, LNG projects continue to face challenges from geopolitical tensions and trade tariffs. Global liquefaction capacity is forecasted to grow at a CAGR of 12.3% over the five-year period between 2025 - 2030, adding meaningful volume to the energy supply chain. The expansion in energy supply will drive long-term demand for LNG shipping, particularly fuel efficient vessels supporting a more constructive market beyond the near-term softness. Next slide, please. Oversupply of vessels in the LNG shipping market is expected to persist in the short term, with 200- 300 new vessels scheduled for delivery between 2025 and 2027.
Limited shipyard capacity should push some deliveries into 2028 and beyond. While the LNG fleet continues to expand, new LNG vessel orders have slowed with the order book to fleet ratio dropping to 42% in the first quarter of 2025, attributed to a lack of new project FIDs, proposed targeting Chinese-built vessels, as well as tight shipyard capacity overall. The LNG fleet is expected to expand at a CAGR of 9% between 2025 and 2030. For MISC, guided by our Resilient Core strategy, we remain selective, focusing on fleet rejuvenation with modern efficient vessels secured by long-term charters to mitigate market and policy uncertainties. Moving on to petroleum shipping. The outlook remains mixed across vessel classes. For VLCCs, the rates are forecasted to slightly outperform mid-size tankers supported by limited fleet growth and stable long-haul crude exports from the Atlantic and Middle East to Asia.
Rates for mid-size tankers like Supramax and Aframax are under pressure due to a wave of new vessel deliveries. While the rates have eased from the 2023 to the early 2024 highs, they remain above the 10-year historical average. The segment continues to navigate evolving regulatory complexities and geopolitical uncertainties, which may add volatility to market conditions. Nevertheless, our petroleum and products business remains resilient, supported by a portfolio of long-term charters and niche lightering services of more than 80% of the portfolio. The segment will continue to optimize fleet deployment and utilization across the spot market, lightering services, and time charters to enhance earnings and maximize profitability. Next slide, please. The projected increase in global oil production, driven by rising demand and the gradual unwinding of voluntary production cuts by OPEC+, is expected to result in an oversupply of oil in the market.
This will support continued demand for crude tankers, particularly for long-haul transport. In line with this trend, the crude tanker order book is increasing, driven by Supramax orders following the Russia-Ukraine conflict. China continues to lead in the global crude tanker order book. The order book to fleet ratio has risen to 11%, signaling renewed newbuild activity aligned with the long-term demand growth and fleet modernization. Between 2026 and 2030, approximately 480 new crude tankers are expected to be delivered, driven by the need to meet rising demand and to replace the aging fleet. Overall, the fleet is projected to grow at a CAGR of around 1% between 2025 - 2030. Moving on to the offshore CapEx investment outlook. Offshore upstream capital spending is projected to grow at a CAGR of about 8.3%, reaching $26 billion by 2029, surpassing the high seen in the mid-2010s.
This growth trajectory reflects a recovery in offshore investments driven by rising demand for FPSO projects. Approximately half of the projects are concentrated in Latin America and Asia Pacific. This trend points to a healthy pipeline of potential awards for floating production systems, including FPSOs and FSOs supporting a resilient long-term outlook for the offshore segment. Thank you very much. I'll pass it back to the MC.
Thank you, En cik Raja Azlan. We will begin the Q&A session shortly. For participants with questions, please use the raise hand function. We will read out your name, and kindly introduce yourself before asking your questions. Each participant may ask two questions in the first round. For further questions, please go back to the queue to use the raise hand function again. We will begin the Q&A session now. First, we have Raymond from CGS International. Please go ahead.
Yeah. Hi, good morning, everybody. Good evening, everybody. Just the first question I'd like to ask is about the FPSO Mero 3. I think that's the one that most people are interested in. On page 10 of the Bursa, there is an other income of MYR 227 million. Is that the one-time gain that's from the commencement of the Mero 3?
Raymond, that is not from Mero 3, because Mero 3 has moved in phase at the end of last year. All the construction revenue and profit has been properly accounted for at the end of last year. The one-time gain that's been recorded in the current quarter relates to FPSO Bunga Kertas, which—
Oh, I see.
has commenced its operation in the Gulf of Thailand with Shell as a charterer at the end of March.
I see. Okay. How much was that, in terms of the value?
It's reflected in the income. I don't think we can share the details here, Raymond. Obviously, that's commercial numbers that we are not able to share.
Okay. That other income on page 10 of the Bursa filing, that MYR 227 million, that is substantially coming from that Bunga Kertas commencement, right?
I believe so, yes.
Okay. All right. That's $51 million if I translate the whole thing to U.S. dollars. The Offshore Division actually reported a profit after tax of $47 million. If I presume that the majority of it comes from Bunga Kertas, majority of the other income comes from Bunga Kertas, that means Offshore would have made a loss excluding that?
No, I think it's included in the other income. There are other contribution from other segment other than Offshore Business. As I mentioned, the FPSO Bunga Kertas one time contribute is a significant portion of the other income.
Okay. Could you share with us how much is your actual profit of Offshore if you exclude that one-time gain? For us, it's very concerning.
Sorry, can you repeat the question?
Sorry, I can't hear you because the line was breaking up.
Raymond, can you repeat that question, please? Raymond, can you hear us?
Can you just also check whether people can hear me on the line?
Yes. Yes, we can.
Yeah. I think my question is concerning the offshore performance, right? Because, the U.S. dollar profit after tax was $47 million. I think my concern is whether that offshore performance actually would have reflected a much weaker number or even losses, if we exclude the Bunga Kertas—
I think if you were to exclude Sorry, Raymond. If we were to exclude the Bunga Kertas' one-time gain, the offshore profit after tax will be in the region of Did you hear that?
Yeah. Raymond, did you hear that, please?
I think maybe, Afendy, you need to repeat again.
Sorry.
I can't hear you. Zahid, we can't hear you and Afendy.
Sorry, my line isn't very good. I'm not sure whether it's the MISC line or my line.
Yeah. Okay. Can you hear me?
The line from the boardroom, because I also cannot hear. Zahid, yeah.
Can you hear me now?
Yes.
Right now, yes.
Okay. If we were to exclude the one-time gain of the FPSO Bunga Kertas for the offshore business, profit after tax will be approximately $30 million. Did you catch that, Raymond?
Three, zero? Is it three, zero ?
Three, zero, correct. Three, zero.
$30 million.
Yes
$30 million .
Yeah.
Okay. Okay. Thank you very much. In terms of the impairment provision, there was a one gain. Is that relation
Raymond, really sorry. Your voice is intermittent. Can you repeat your question, please?
Okay. Maybe I'll come back in with a question later. Thanks.
Okay. Thank you, Raymond. Please do come back with the question just now.
Okay. The impairment provision of MYR 30.8 million, is that in relation to the LNG
Yes.
Yeah. The impairment is about $7 million for the quarter. They are relating to the older LNG vessels, because of the oldest benchmark against the market value of those vessels.
Okay. Sure. Another technical question about the net gain on the acquisition of subsidiary, which I presume relates to FPSO Kikeh. That amount was MYR 55.8 million. Was that included as part of the offshore profit of $47 million? Yeah. There was a net gain on acquisition of subsidiaries of MYR 55.8 million, or around $12 million-$13 million. I presume that is in relation to your acquisition of FPSO Kikeh. Was that included in your offshore $47 million PAT?
It is not.
Okay. That $47 million PAT is not including that gain, right? Okay.
Yeah. Correct.
How about the loss on modification of finance lease contract amounting to MYR 62 million? What is this loss in relation to, and was it offset against the revenue line?
The loss modification is related to FPSO Bunga Kertas replacing FSO Benchamas 2. When we take FSO Benchamas 2, we have to unwind the finance lease receivable related to the FSO Benchamas 2 corresponding to the next one-year lease term.
Okay. That's netted off against the $47 million profit, right?
Yes, I believe so. Correct.
Believe so. Okay. Sure. Okay. Thank you very much for now. Thank you.
Thank you, Raymond. Are there any other questions? If you have any questions, please feel free to raise your hand. Use the raise hand function to ask your questions. Okay. Thank you. We have one question from Mr. [Vince Heng]. Please go ahead, Vince.
Hi. Good afternoon, guys. Just for administrative purposes, could you share your term to spot ratios for all the shipping segments, please?
It's 82% for both the gas and the petroleum segments. 82% term charter versus spot.
Okay, got it. Thanks.
Thank you, Vince. We are still open for questions.
Yeah. Hi, Faizan. Sorry.
Yes, Raymond Yap .
Yeah. I'll just come in and ask the question. Okay. In terms of the FPSO Mero 3, could you give us an indication of how much it contributed to the offshore segment in terms of PAT this quarter?
It is quite significant, the contribution to the PAT for offshore segment for Mero 3, Raymond.
Okay.
Yeah.
Because this is the first time, I think, because in the fourth quarter, Mero 3 had a provision, and it probably incurred a loss, I believe. Maybe it could help us analysts, just to be able to countercheck our model and make sure that it's okay.
I would say out of the $47 million, the contribution of the PAT is more than 50%.
Okay. Sure. Okay, sure. Thanks.
Thank you, Raymond. We have a question from [Witek]. [Witek], go ahead, please.
Hi. [Witek] here from Manulife. Could you give us an update on the merger discussion with Bumi Armada?
Yeah, [Witek], it's ongoing and we are doing the due diligence at the moment. We will make an announcement when we have come to a conclusion. At the moment, it's ongoing. The process is ongoing.
Any targeted timeline?
I think there will be progress announcements as we go along.
Zahid here. If I can just add on top of that. I think in the MoU that is signed, we have given both parties nine months to come to a decision about this merger, whether it's on or not. We are currently towards the end of that nine-month period. We hope by June, July, I think that's the period where we are going to make that decision. In the sense that whether it's possible or not possible, whether it makes sense for both parties or not. I think what we're trying to say, we are working according to the MoU timeline that we have set ourselves, and we are towards the end of that timeline.
Okay. Thanks very much.
Thank you, [Witek]. We have a question from [Vince]. [Vince], go ahead, Vince.
Thanks, guys. I actually have a question on your gas assets. Out of these new builds, when are these going to start entering the fleet? Could you give us a timeline? How many are they?
From 2026 onwards, we will start to see deliveries happening. They will come 2026 - 2028. You'll see the new vessels coming on board.
There's none this year, is it?
No.
I think, Raja Azlan, maybe for the joint venture vessel. I think they already started coming this year. The LNG for the Qatar. Maybe you can give that number.
I think for the joint venture asset, there'll be about four or so. There's four LNG vessels under our joint venture with our consortium partners for the QatarEnergy project.
Those will be coming in when?
Two in the third quarter and another two in the fourth quarter.
Okay, great. Thank you.
Thank you, Vince. Okay.
Hi, Faizan. This is Raymond here again. Let me just ask again about the offshore $47 million profit. When you disclose this $47 million, I know the offshore division has a lot of intercompany loans with the parent company, MISC Berhad, and interest expense is paid on those intercompany loans. When you disclose $47 million, is it netted off against the interest expense on those intercompany loans?
Yes.
Yeah. The answer is yes, Raymond. Similar to the answer that I gave in the previous quarter, our treatment for the business segment will deduct the financing cost for the segment, including intercompany loan that we have provided to the business. In this case, for Mero 3, I think the bulk of the financing is intercompany. The $47 million is reflective of the intercompany interest cost. Correct.
Okay, sure. Which means that, on a standalone basis, the Mero 3 actually earned more than that
Sure.
$47 million, yeah, assuming there's no intercompany. Okay, sure. All right. Thank you.
Thank you, Raymond. Okay. Since there are no further questions, Zahid, can I invite you for a closing remark?
Thanks, Faizan. Thank you everyone for making the time. I think the quarter one result, as I think we mentioned earlier, certainly is a good start to the year. We hope that we can maintain the momentum. The headwinds are there. We are going to remain vigilant in terms of making sure our operational performance as well as our safety performance is to the level that what we want. Thank you everyone for making the time. I think the investor relation team will provide you with the data everyone.
Thank you, Zahid. Yeah, this concludes today's conference call. On behalf of MISC Berhad, we thank you for your participation. The PDF version of our presentation slides has been sent to the attendees of today's call and will be made available on our corporate website. To sell-side analysts, please forward us a copy of your research report to the MISC IR team for our reference. Thank you once again, everyone, have a good evening.
Thank you.
Thank you, everyone. Bye.