Very good evening, ladies and gentlemen. Thank you for joining our fourth quarter financial year 2024 earnings briefing. My name is Faizan from MISC's investor relations team. We're pleased to have with us today, Mr. Zahid Osman, President and Group CEO of the group. Mr. Raja Azlan, Chief Strategy and Sustainability Officer. Mr. Afendy Ali, Chief Financial Officer. And Ms. [Rozelin Pao], Head of Strategy and Investor Relations. Before we begin the proceedings, I would like to invite Mr. Zahid Osman, President and Group CEO, to deliver his opening remarks. Zahid?
Thanks, Faizan. [Non-English content] , and good evening, everyone. Thank you for making the time to be with us this afternoon. And certainly to join us for our fourth quarter earnings briefing where we will be sharing key updates on our operational highlights, financial performance, and the outlook of the market for the quarter. 2024 has been a year marked by both key strategic achievements and challenges for us in MISC. The group fully had 2024 financial performance actions, but it brings in the plans and challenges in strategic direction in our Offshore segment. As a result, however, supported by our performance of the past two years with our business and the turnaround in the Marine & Heavy Engineering segment of the group. Some of these concepts we have taken on board being the vision and strategic plans to our delivering value for shareholders.
Our annual remaining strong this year. I'm pleased to inform you that in 2024, we declared a total dividend of MYR 0.50 per share, compared to that of the past year. The Gas Market segment is certainly driven mainly due to weak LNG carrier spot market. Due to the downturn in demand and supply for the LNG vessels. The demand for LNG vessels in the near term is lower due to any of the LNG projects that were supposed to come on stream were delayed. On the other hand, the supply of these newbuild vessels that are supposed to support the LNG projects came to the market as per plan. I think in our long-term charter requirement, our vessels are supposed to compete in the spot market, especially during temporarily weak LNG market.
As a result of that, our financial performance in the Gas segment has been affected due to the demand and lower revenue due to this lower market situation. In addition to that, we also see a lower earning base for our vessels following the disposal of three vessels in 2024. The Offshore segment faced financial pressure due to lower construction profits from our VLCC project if you compare to last year. That basically means that was the final stage of completion. On one hand, we're very happy to see the oil coming from the project and official, but we also recognize in term of the impact on the construction profit. I think the other things that we need to work on with note is the high competition for the FLNG project has been affected due to this late year.
Despite these challenges for us in MISC, we maintain our resilience despite the changing in the LNG shipping market. We continue to focus on navigating this evolving environment while continuing to pursue long-term growth opportunities to strengthen our portfolio as well as our position in the market. We continue to be proactive in renewing our LNG fleet with modern and efficient vessels. Based on the announcement that we have made so far, by 2027, our Gas segment will see delivery of 19 new LNG carriers on long-term charter. These deliveries are expected to strengthen our Gas segment revenue and cash flow going forward.
In addition to this, in reaction to the acquisition of the PETRONAS Group, Gas and Maritime Division, we constantly explore opportunities and synergies with the group by aligning our core strength of our business. An example of this is the recent announcement, I think later part of last year for the carrier that we will build and own charter to PETRONAS Energy. For the gas acquiring vessels, we are exploring conversion projects to repurpose these vessels into either floating storage solutions or other purposes. I think the other options that are available for us to do with these older vessels is to lay up some of these vessels so that we can reduce our operating cost.
Only will take effect if we see the spot market, the charter market, going up going forward. As I said earlier, we are very pleased as an organization when our Mero project delivered its first oil around the end of October. This is critical for us because it shows the commencement of the project and also the long-term steady stream of cash flow for the group.
However, with the key construction challenges for the project, it is likely to impact the smooth execution for operation. We certainly look forward for Mero to be an anchor contribution to our financial performance going forward. If you recall, in November last year, we announced that MISC had entered into a non-binding MoU with Bumi Armada to mutually explore the possibility to share the synergies of our FPSO business such that with Bumi Armada. The MoU is effective for a period of nine months. Just to update all of you, the discussions continue ongoing. We are at the beginning of starting a detailed due diligence process to better evaluate under which we will try how the opportunity will be pursued moving forward. For now, I think that's the only thing I can say on that matter.
I think despite the challenges faced by the Offshore Business Unit in 2024, we record the key achievement and positive development. We are invested in delivering and executing our Deliver Progress strategy. AET last year celebrated 30th anniversary. It is important for us to see the Petroleum segment continue to deliver its performance for the overall group. 2024 marked one of AET's strongest year of leveraging on a robust oil market to achieve the best financial performance in more than 15 years. Revenue, cash flow, and net profit after tax were exceptionally strong, underscoring its ability to navigate the market dynamic effectively. In 2024, I think in our Petroleum segment, we continue to make progress in the new energy segment when it signed two FID on three ammonia fuel gap projects and with two of them are on long-term charter to PETRONAS CCS project.
On MEG, we certainly keep the current turnaround of MEG, and also with the steady caseload with the renewal of MEG segment. We certainly hope that MEG continues to maintain its performance going forward. Just to close, I think our financial performance for this year reflects the challenges of a highly competitive and volatile market environment, resulting in lower revenue, profit, and cash flow compared to the previous year. It has been a challenging year. We see it as an opportunity for us to reevaluate and strengthen our delivery capacity in executing our Deliver Progress strategy. We would like to thank our stakeholders and shareholders for their continued trust and support to MISC throughout 2024.
As we move forward into 2025 with the New Year approaching, we will continue to intensify our efforts across all business segments while towards operational excellence while focusing on delivering value to our stakeholders. I look forward to a more productive discussion and meeting today, and certainly welcome any questions at the end of our presentation from all of you. I will pass back to management who will take you through in more detail the performance of each segment such as the detailed performance of our financial results for 2024. Thank you.
Thank you, Zahid. Before we proceed to the presentation, I'd like to draw your attention to the disclaimer slide. This presentation contains forward-looking statements with reference to our plans and expectations, whether our actual results could differ due to unknown risks, uncertainties, and other factors that are in many cases beyond management's control. I would like to invite Encik Raja Azlan for his few remarks on the quarter's highlights to business updates. Encik Raja Azlan.
Thank you, President. [Non-English content] and a very good evening to the shareholders and our analysts. As mentioned by Encik Zahid, this quarter has indeed presented its share of challenges and achievements. However, I would like to highlight that despite a decline in revenue and profits, we have been able to maintain stable cash flow. We continue to deliver shareholder returns. Despite revenue has been down. You can see quarter-on-year is down. Most after-tax reserve based on what we reported is also down quarter-on-quarter if you have a view on here. However, if we exclude the one-off impairment provisions, there was about MYR 58 million in 2023 compared to MYR 215 million in 2024. We have more or less flat at MYR 487 million of profit before impairment in 2023 versus profit before impairment of MYR 485 in 2024.
As such, we have been able to maintain our dividend at MYR 0.36 a share, given that stable profit or before non-cash items. In terms of GHG intensity, the fourth quarter of 2024, we recorded 5.25 g of carbon dioxide equivalent per tonne nautical mile of our GHG intensity across our gas and petroleum shipping units, and this represented a 12% reduction year-on-year, which is quite commendable, and it is putting us on track to our promise of 50% reduction by 2030. In terms of business highlights, the FPSO Marechal Duque de Caxias achieved its first oil in Offshore Brazil. The successful commencement of its operations ensured a steady and long-term cash flow to the MISC Group. Despite having to close the books with some additional costs, it was within our original expectation.
As we had highlighted before, back in 2022, we are still within the same CapEx number that we guided management analysts with. We also managed to complete the acquisition of Teekay and also the divestment of FPSO Santoso at the end of January 2025. Now we are 100% shareholder of FPSO Teekay. The transactions are in line with our initiative to streamline business activities by having full operational control of strategic assets within our portfolio. We also signed two TCTs for the two LNG ships with Petronas on the 16th of December 2024, which is scheduled for delivery in 2027. This is in line with our plan to rejuvenate our fleet.
As mentioned just now, by the end of 2027, we look to have an additional 19 new vessels based on the latest technology under the Gas Business Unit, which will help us with our emissions and our cash flow for the gas unit going forward. On the 26th of November, we entered into a strategic collaboration agreement with the clean energy solutions provider, Gentari Hydrogen, to jointly explore the development of integrated shipping and quilting solutions for clean ammonia, targeted for completion at the earliest by 2027. Looking back at 2024. So far as cash flow, yes, there was a decrease in cash flow. You can see from the slide that cash flow has decreased by 23%, but we need to remember that last year there was a one-off FSU prepayment of about MYR 240 million.
If we look at the post-deducted cash flow from operations in 2023, our CFO has declined by 10%, mainly because of higher payments to creditors. These are mainly timing issues, but we should see an uplift in 2025 with the recognition of the cash flows from FPSO Mero. As I mentioned just now, our dividend declared for the whole year of MYR 0.36 is consistent with the payout in 2023, despite the lower profit after tax reported. As you can see at the bottom of this slide, these are among the awards and recognitions received during the year, demonstrating our strong commitment to operational excellence, safety, sustainability and governance. We can go to the next slide. In relation to our key achievements in 2024, these are the main key achievements that we would like to highlight during the year.
Number one, AET has successfully delivered the third and final LNG dual fuel VLCC, the Eagle Veracruz, in January 2024 to Shell Tankers (Singapore). This supports the group's strategy of rejuvenating the petroleum tanker fleet and reinforcing our commitment to reducing our carbon footprint. We also have been focusing on rejuvenating our LNGC with modern and efficient LNG. As mentioned earlier, we signed the two long-term TCTs with a period of 50 years with [Kuza Energy] , with options. These will renew in second quarter delivery in 2026 onwards. In line with our 2030 ambition of achieving a 50% reduction in GHG emissions for our shipping operations, AET signed a TCT with PETCO Trading Labuan Company Ltd for the world's first two ammonia dual fuel Aframaxes.
MHB has further strengthened its involvement in the renewable energy space by securing a second Offshore wind project to build the OSS HVDC platform in support of Sembcorp 2 GW program. AET and the Singapore Maritime Foundation signed an MoU to jointly develop Singapore's maritime talent pool, and under this MoU, AET will sponsor four scholarships with two internships per year from 2025- 2027, furthering its support for AET PARTNERSHIP. ALAM has partnered with Saudi State Shipping towards the shared mission to nurture the next generation of maritime professionals, and the signing of this MoU marks a historic milestone for ALAM as we expand our reach beyond Southeast Asia for the first time, solidifying our position as a global leader in maritime education.
In terms of the market outlook for 2025, as we had reported in our announcement, the outlook for LNGC rates is expected to remain soft in 2025, driven by the continued influx of new vessels and delays in the additional supply from new LNG liquefaction projects. We believe that the rates are expected to recover post-2026, driven by the gradual increase in LNG supply as the delayed projects become operational. Based on the outlook as reported by the consultants and research houses, we are looking at a 12% CAGR over the next five years in terms of the liquefaction capacity. In terms of Petroleum business, the overall tanker market outlook for 2025 remains positive, supported by high ton mile demand from the continuous vessel redeliveries that we see, and also from the long-haul Atlantic major trade, as well as minimal fleet expansion.
Within the Offshore space, the steady oil prices and sustained global oil demand continue to encourage investments in the Offshore projects, supporting a positive outlook for the Offshore segment. These favorable conditions drive the ongoing growth of the FPSO vessels projects in South America, West Africa, and the Asia- Pacific. In terms of MHB, the Heavy Engineering segment is poised to capitalize on the sustained strength of the upstream oil and gas demand and pursue growth opportunities to ensure a balanced portfolio both across conventional and new energy sectors. Meanwhile, the marine segment, with an increase in upstream activities expected to drive further opportunities for conversion repair and maintenance services. With that, I will end my presentation and pass it to Faizan. Thank you.
Thank you, Raja Azlan . Next, we will have a presentation on financial performance by CFO Afendy, followed by a market outlook by [inaudible] . Afendy.
Thank you, Faizan. [Non-English cotent ]. Hi everyone. I will share with you the highlights as we go through the quarter numbers followed by the procedure. For revenue, MISC Berhad recorded an increase in revenue of MYR 983 million in quarter four compared to the corresponding quarter. This reduction was primarily driven by the Offshore Business, which saw a decline in construction revenue contributed by FPSO Marechal Duque de Caxias , which reached its first oil in quarter four last year. Following this, the associated revenue for ongoing construction activities tapered off, resulting in a lower revenue recognition from this segment in the current quarter. Additionally, the Heavy Engineering segment also experienced a revenue decline. This was due to several projects in the segment nearing completion, which led to a reduced activity and therefore a decrease in revenue for the quarter.
Against the preceding quarter, net revenue between quarter compared to the preceding quarter was driven by the recognition of construction revenue for our floating storage unit in our Gas segment and revenue recognition from the commencement of the charter hire for FPSO Marechal Duque de Caxias in the Offshore segment after the successful production of first oil at the end of October 2024. For the year or preceding quarter, the group recorded an increase in operating profit by MYR 98 million in the current quarter, primarily due to activity growth, as well as the Gas segment. The Offshore Business segment recorded an operating loss as compared to a profit in the same quarter last year. This was primarily due to the lower profit per project as well as. Meanwhile, the decline in operating profit for the Gas segment was due to higher receivable installments in the current quarter.
On a positive note, the Heavy Engineering segment contributed to a higher operating profit, in which the improvement was driven by the recognition of cost recovery claim, which partially helped to offset the decline in the LNG segment. Against the preceding quarter, group operating profit declined quarter-on-quarter by MYR 62 million, primarily driven by the higher cost provision for Offshore Business segment, as well as higher receivable installments from Gas segment as I stated earlier. The next sheet. The profit after tax. MISC recorded a group loss after tax of MYR 91 million for the current quarter as compared to the profit after tax in the corresponding preceding quarter. The primary driver behind this shift was the higher impairment provision in the Gas segment, which further exacerbated the lower operating profit in the current quarter, leading to overall loss after tax.
Excluding impairment, the group reported an adjusted profit after tax of MYR 51 million in the current quarter, 53% lower than the same period last year, as well as 3% lower compared to the previous quarter. Cash flow from operation in the current quarter by MYR 27 million as compared to the corresponding quarter, mainly high production on the Offshore Business segment coming from the completion of our FPSO mechanical and fabrication. The previous quarter, Cash flow from operation was higher in the current quarter by MYR 169 million, mainly from the high production of our Offshore Business, as well as the MHB Heavy Engineering segment. For the full year, MISC Berhad recorded a decrease in revenue by MYR 323 million compared to the corresponding year.
This reduction was mainly attributed to the Offshore Business segment, which saw a decline in construction revenue due to delayed FPSO mechanical and fabrication, which relates to the completion on the first oil of the boat . Thanks to both delays completion, associated revenue from ongoing construction activities ended off, resulting in a lower revenue contribution from this segment in the current year. The group operating profit of MYR 550 million, which was lower than the prior year operating profit of MYR 631 million. The decline was mainly due to the profit in the Offshore Business segment, followed by a lower project progress as well as a higher cost position. Additionally, the Gas segment also recorded a low operating profit and lower earning rates and factor rate, coupled with higher provisioning.
The decline was partly offset by the Petroleum segment that recorded a higher margin and contributed positively to the overall performance, coupled with stronger performance in Heavy Engineering segment. Claims returned to black in the current year as compared to MYR 81 million in the same period last year. The improvement was driven by recognition of past before the claim and better cost efficiency. MISC Berhad recorded a group profit after tax of MYR 270 million in the current year, 57% lower than the corresponding year, due to lower operating profit and higher impairment in the Gas segment, which had a significant impact on the overall profit. Excluding impairment, the group reported profit after tax of MYR 443 million, which narrowed compared with the prior year against the corresponding year of 2020.
In the prior year, Cash Flow from operation was lower in the current quarter, again due to the one-off asset impairment that took place in 2023. Excluding the one-off impairment, was only lower by 10% and this is due to the higher payment made to the tax this year. Our balance sheet. Total assets as at December 2024 decreased as of December 2023, mainly due to the amortization of finance lease income, impairment, and depreciation charge, which led to the reduction in asset values. Total liabilities reduced over the same period, mainly due to higher net disbursements and debt through the year. As a result of the lower liabilities and the higher disbursement of borrowing, the group gearing ratio has improved as of December 2024.
As mentioned earlier, our cash balance as of December 2024 was lower than the previous corresponding year, followed by the higher net disbursement of loan and borrowing. The decline in the cash balance as of December 2024 resulting from the payment credits in addition to the higher net disbursements of loan and borrowing, partly offsetting the lower payment of tax paid this year. These are additional information analysis that we are sharing with all of you. If you look, I just give you an incremental information on here. If you look at the Gas segment, it recorded a MYR 128 million loss after tax in the Group for 2024. That is because of one-off asset impairment of MYR 161 million in quarter four.
If we were to remove that, the normalized PAT would have been MYR 33 million, which is comparable at least to the previous quarter-end of 2024. The financing for the Offshore Business Unit, the financing cost is about MYR 26 million. For both Petroleum and Heavy Engineering provided a very strong performance, with slightly better utilization for Petroleum and a strong utilization for both Petroleum and Heavy. For the full year, similarly, if you look at the Gas segment, if we were to remove the asset impairment of MYR 173 million, the profit would have been MYR 133 million compared to MYR 12 million in the previous year. For the Offshore Business Unit, included in the MYR 92 million loss for the Offshore, financing of MYR 109 million. I think that is all that I have to give you a financial summary. Thank you.
Thank you. Good evening, ladies and gentlemen. I will just take you through the market environment slide. Let us start with the LNG shipping side. In the fourth quarter of 2024, LNG rates, as already mentioned, we have seen the positive rise, and this is coming due to the higher availability of vessels resulting from the positive year-end LNG deliveries. This oversupply, as you mentioned, has impacted our long-term valuation of our assets. Maybe that can be a Gas segment. Looking ahead, the LNG shipping market is expected to remain soft in the three to five years outlook and is driven by the impact of new vessels and also the delay in the additional supply of new LNG production projects. Specifically, the outlook for LNGC steam turbines are expected to decline further, reflecting the market shift towards more LNG technology.
Conversely, the spot rates for [inaudible] carriers, we are expected to increase as these vessels offer better fuel efficiency. This trend highlights that the industry's preference is towards advanced systems like to alleviating mass emissions. Despite these challenges, we can cement the team's directive to exploit future opportunities for its core vessels, and this includes repurposing our vessels as well as finding opportunities in the spot market. Moving on to the next slide. In 2024, the FIDs for LNG projects has slowed down. Primarily, this is due to the temporary pause imposed by the U.S. government on new licensed LNG projects. This pause has definitely created uncertainty in the market affecting investment decisions.
Outlook for FIDs for the next three years remains positive with the lifting of the current shores on new U.S. LNG exports permit, as dictated by Trump's administration, is expected to add on additional support and drive more investment in the sector. Globally, liquefaction capacity is projected to grow to about a pace of 11%-12% between 2024- 2029. This growth is prompted by the increasing vessel delivery that we will see and also development of new liquefaction capacities. The expansion of global capacity will definitely increase LNG and also meet the rising demand of the next slide, please. As more FID or listing projects come into play, there will be new building orders for LNG carriers, which have remained strong or robust starting from 2025 and beyond.
This trend reflects the growing confidence in LNG markets and the need for additional shipping capacity to support new projects. In the next three years, a higher number of LNG is expected to be delivered. Despite the strong order book, there could be shortages, simply due to shipyard capacity, as well as the high demand from delayed projects. As a result, some deliveries will be pushed, affecting the overall supply timeline. Next slide, please. Despite experiencing a quarter-on-quarter improvement, the spot rates of crude carriers in the second quarter of 2024 remains subdued. This is primarily affected by the slower than expected shipping. Remains subdued for perhaps the first half of the year. This is primarily due to the softer oil demand from China and also the ongoing output cuts by OPEC.
The overall outlook for the tanker market remains positive, supported by the high ton mile demand, resulting in continuous vessel re-booking and lower haul rates between the Atlantic and Asia. Additionally, this Middle East city expansion has also brought a more favorable market stance, supporting this positive outlook. The overall order book for crude tankers is expected to grow in the forecast period and for the need for replacement to meet the increased tonnage demand. This requirement will encourage ship owners to invest in more new orders to ensure that they handle future demand. The tanker segment in particular is projected to receive about 400 new deliveries throughout 2029, these new vessels will help meet the rising ton mile demand and replace the aging global fleet.
This segment is expected to grow at a CAGR of 1% through 2030, reflecting steady expansion and modernization patterns in the segment. Demolitions are all expected to be weak in 2025, this is due to the positive spot rates that encourage older vessels to continue operating. These favorable market conditions provide little incentive for ship owners like us to retire our aged fleet. With the lack of replacement tonnage, that will contribute to the slowdown in demolitions over the next few years. Moving on to the Offshore segment. As you know, the Offshore segment has always been positive, there is a significant uptrend in the LNG spending, driven by the industry's ongoing commitment to explore and develop new Offshore resources, despite the challenges and high costs. This industry is very resilient, it's determined to secure future energy supply.
This upward trend in the global FPSO market in the upcoming years can be seen in South America, Africa, and Asia. These regions are poised to become key markets in the FPSO space and will overall contribute to the expansion of the oil and gas activity. Moving on to my last slide. We do think that the overall FPSO awards remain strong over the next few years. Operators are increasingly focusing on ordering large FPSOs, especially in these areas, South America, Africa, and Asia-Pacific. These are actually reasons for an expansion in production capacity. In South America, we're looking at a significant rise of demand for large FPSOs. Similarly, for Africa, there's potential to capitalize on untapped reserves. In Asia-Pacific, it is more to boost energy security. This comes to the end of my presentation. Thank you.
Thank you, [inaudible] . We will begin the Q&A session shortly. Participants with questions, please use the raise hand option. We will reach out to you, and kindly introduce yourself before asking a question. Each participant may ask two questions in total. For further questions, please use the raise hand function again. We will now begin the Q&A session. First, we have Raymond from CGS Go on then, Raymond.
Hello, good evening, everyone. Thank you for the call. I'd just like to ask about the impairment. The impairment of MYR 161 million is entirely LNG, right? Will you be making any further impairments in future quarters or next year? Did you do efficient thinking and get all the impairments done immediately? The second question is on the Offshore side. I do notice that the Offshore revenue has gone up because of the contribution from the Mero 3 for two months. Why is it that the Offshore loss actually widened from the third quarter? Third quarter was a MYR 24 million negative, and in the fourth quarter, it became a MYR 43 million negative. What happened there? Thank you.
Thank you, Raymond.
Thank you for the question, Raymond. Let me attend the first question, which is on impairment. Yes, the bulk of the impairment is relating to our LNG vessel, right? What actually happened in quarter four is because of the macroeconomics that impacted shipping, like what Zahid mentioned at the beginning of this opening, which is that too many vessels but not enough LNG volume for delivery, right? That's number one. Number two, there was a disclosure by HPB of their old key vessels. I think that was one of the primary reasons why the devaluation that we got from the third party came down by over 40% in the fourth quarter. It's good to compare because what we do when we prepare our financials on a quarterly basis, we compare with a third party, right?
The first three quarters of last year, 2024, the reduction is only 43% quarter-to-quarter. In the fourth quarter, the market really dropped by more than 40%, right? That's the reason why when we do our site value for our assets, if you compare our net book value versus the market value, then we have that significant devaluation. From an accounting point of view, that's why we have to make that provision. Okay. On your second question on OBU, as you can appreciate, as we acquired the FPSO Mero 3, right? There were a lot of settlement of costs with our vendors. Hence, we have accrued most, if not all, the costs to position for our Mero 3 payout, which is proportionate to the shipping in the fourth quarter. Thank you.
Okay. Essentially, you provided for some of the costs of bringing the Mero 3 to operation, but not all. You dressed up the loose ends and took all the provisions into the fourth quarter. Presumably, for the first quarter next year or this year, you should see the full contribution to the normal run rate of the profit for Mero 3. Just a follow-up as well on the LNG, right? Since you marked down the LNG vessels to the market value, can I say that the market value is now lower than the value in use? That's why you marked down to market value, and in the future, if the market value declines further, then you might have to mark down and take another round of impairment.
If the market value goes up, for some reason, if it goes up, can you actually write back your impairment that you made in the fourth quarter?
Yeah. Actually, it is that, Raymond. In turn, the market value goes up. We would be able to write back to that extent, the type of our book value at that point in time, right? Yes.
How about the provision for the Mero 3? Is that in the whole complete first quarter will be paid clean?
Yeah, we have made most of the provision for the full 2023 last year. For the whole fiscal very much.
Okay, thank you. I will just do one more question, because the LNG vessels, the rates are very weak. If you do lay up your vessels in preparation for sale, how much is the cost of layup on an annual basis?
$400,000 instrumental cost per vessel. $400,000.
Oh, $400,000 per year.
Yeah.
Okay. Thank you.
You open any questions? I have a question from, I think in the chat. I mean, not sure if this has been asked before. Could the management elaborate on its plans to activate its share buyback program?
Currently, we do have the shareholder approval of 10% for share buyback program, which means that the approval is still valid until the next AGM. We are actively planning to exercise that or to make use of that for the time being as well. The reason is to conserve the resource for our growth of the business now.
We have a-
Here. We have another question from Victor Go. Could you provide more details on the impairment of receivables?
If you look at the Bursa share, there were two impairments on the group, 3M one. The impairment of group operating profit is in relation to the receivables. This is the receivables impairment that we have made in the quarter four based on our amount due from our Japan LNG that we are recovering. Given the long outstanding discussion on amount from Japan LNG and given the instability of the geopolitics in that region we have taken the decision to take the full impairment of amount due from Japan LNG. Having said that, our discussion negotiation with Japan LNG continue, and we obviously aspire to get something out of that discussion that we take it forward with Japan LNG.
Thank you. Definitely. I will read one more question from the chat before I go back to the raised hand queue. There is a question from Jack on the clarification on the provisions for whether MYR 735 million is LNG and MYR 221 million is for receivables.
Yes, the answer is yes.
All right, we'll go back. Thank you. We'll go back to the queue. Go ahead, [Koh Meng].
Just to clarify again that MYR 735 million impairment is for one ship or how many ships is this applied to?
It's really not one ship, [Koh Meng]. It's really not one ship.
Okay. I guess you're safe to say that your fleet is much too, and all those who are going to conversion have to affect you. How much is the cap on that or do you think or?
Most of the asset LNG carrier that was impaired is relating to our VLGC class as well as the LNG class. 10 vessels in total.
Oh, 10 vessels in total. Okay. Is this the ship that for some of your existing vessels, you also impact some of the utilization rates as well? Or how do you see it? Because I think they are still being chartered, right?
Yeah. The impairment provision or the accounting is that we have a net book value, and we compare the net book value against either our value in use or the market value. Most of these vessels are on new contracts that are at the tail end of the contract. The value in use is actually lower than the market value. Hence, when the market value drops, the difference between the market value and the net book value, that's the amount that is actually impaired.
Oh, I see. Okay. My next question is, thanks for sharing your outlook in terms of the current market situation. Have you had your studies, in case, in scenarios of when this thing may do this or do that, or what is it? Far it's maximum charge or the other way. What opportunities that you see, especially for your licensing business?
Let me just try to answer that. For my group, I think everyone has seen that the new administration has a few tariffs in terms of how to support and balance the trade between U.S. and the rest of the world, especially based on what we have seen from the first time as the president, when Chinese especially reserved the flow of international trade. We have tried to change it with the tariff coming from U.S. and the tariff coming from the other countries, it definitely have a negative effect on the flow of trade globally. At the moment, I feel that it's too early for us to make a full assessment what it means for our We want to monitor the sequence of this tariff war, if I can use that term, closely.
For our licensing operations, at the moment, most of the licensing, the reverse licensing, which means the vessel, the volume coming from the U.S., when we export it out. As I said, it seems too early for the time being to make a full assessment.
I also keep a trend of all the other private sector companies. The way they report their contracts nowadays is they request a range, like being employed for 58 months, another rate, or some months another rate. Everybody's looking at rates now because of this geopolitical uncertainty. Are you seeing the same thing and how would that impact your accounting for your associates if that happens?
I'm not sure I understand. If we need to report, we will certainly, with whatever information we have, we will report. The future forecast, that maybe is not something we can give in our future outlook, what we do or don't. That is just an outlook or guide, not even guidance yet for our view of the market and the business itself.
You mean the new contracts for assets now, is it locked, negotiated in such a way where it is no longer just locking for a certain tenure, but a few scenarios, that kind of thing, a range?
What we have seen for the LNG, for the customers, the treasury or the contract that we have signed, the commercial framework remains unchanged. The numbers may be different depending on the market at that point, we don't see any new commercial structure or framework being introduced just because of this tariff uncertainty in the market.
Okay. Just one more question for me. For your Mero 3, because the first oil was on 7th October, right? By right, you should have at least two months of full contribution from Mero 3. You have the provision approved for you to pay off your vendors and everything. What is the total provision again? The amount of provision for Mero 3 in the partner?
We have incorporated all the costs, the required total costs for Mero 3 that we have after oil flows. MYR 115 million, approximately around that number.
Okay, MYR 115 million in total alone?
Actually, there were, I mentioned, helpfully, there were some plus and some minus. What Afendy mentioned, those are the additional total costs, there were some minus, which was removal of certain cost provisions that are no longer applicable. Net, probably you're seeing maybe somewhere between MYR 50 million-MYR 80 million total impact in Mero 3.
MYR 50 million-MYR 80 million. That's why that also entirely offset the two months of the first oil income from there. I think.
Yep.
Okay. All right. Thank you.
Thank you, [Meng]. I have a question from Raymond, in the queue.
Yeah, just a quick one, about the Gumusut-Kakap and the Mero 3 intercompany loans. When you repaid the Sembcorp project financing debt in 2022, I think the size of the debt at the moment, at that time, was about MYR 3 billion. Let's just understand how much of that is actually left as intercompany loan right now, and what kind of interest rate are you charging from MISC Berhad to Sembcorp? A similar question for Mero 3 as well. How much is the interco loan, and how much is the interest cost on that? I am trying to work out what your Offshore profit would have been if not for the intercompany interest expense.
Okay. If you go back to 2022, we raised MYR 1 billion of bond. Out of that MYR 1 billion, about MYR 700 also was for GK, and about MYR 300 was for Mero. Since then, for GK, maybe they have paid back, I think about MYR 200+ . MYR 200-MYR 300+ . For Mero, the company has continued to plow in cash into Mero. We have put in our own cash flow into Mero. If you look at Mero, it is a company with more than MYR 1 billion.
More than one, okay.
More than MYR 1 billion. The interest rates that we charge will be based on market rates plus the margin. Market rates, you can refer to the UST tenors , for example, plus the margin, for example. It's going to be more than 5%-6%.
Okay. If Mero 3 is MYR 1,000 million, or MYR 1 billion, that means it's about 50% geared, is that correct?
More than that. At the end of the day, it needs to be geared at 70%.
Right. The CapEx is about MYR 2 billion. 70% of MYR 2 billion will be MYR 1.4 billion, it should be around there.
At this moment, it's slightly below that.
When we refinance it, we will take it to that level.
Okay, understand.
Raymond, from a group perspective, Mero 3, the only external finance is only what's done at the moment. The rest is fully funded at the moment.
Okay. Is the internal finance for Mero?
At the moment, yes.
Okay, MYR 300 million. Okay. That MYR 300 million remains at that value because it hasn't been paid off yet?
For that is in relation to the MYR 1.1 million that I mentioned earlier.
Right. I understand. Okay, thank you very much.
Thank you very much. We have some more questions from the chat. First one being the term-to-spot ratio for the LNG and the fuel spots.
It's about 85% long term and the remaining spot. That's the overall contract ability.
What will be the normalized profit after tax for the year from Offshore segment, excluding the cost provisions?
For the full year, if you look at the operational guidance, it is about MYR 90. If you look for the full year of 2024 for the net sales and cost, it is MYR 93. That is about MYR 50 million pre-tax profit for Offshore business. If you would divide it by 12, that is the trend.
Thank you, Afendy. We have a question on the LNG spot vessel utilization rate.
For the LNG utilization spot vessel rate, we have about 50%-55%.
I'm sorry, is it Afendy? Just now you said that the normalized profit for Offshore is MYR 15 million for the whole year, is it? Or is it MYR 50 million?
MYR 50 million. I mentioned earlier, the additional cost is about MYR 150 million. If you look at our slide, for the full year of 2024, Offshore Business net loss after tax is about MYR 92 million. That's MYR -92 MYR +150 is about MYR 50 million. More or less.
Okay. Thank you.
We have more questions. Okay. We have [inaudible] on the line. Go ahead, [inaudibe].
I think all the questions have already been answered in the chat. Maybe just check. Can I just check how many vessels of this segment do you think will be up for this year? I know they already have some ready since they finished the Santoso.
Can you repeat the question, please? It's not clear.
Can I just check if, in terms of how many vessels that will be ending their charters this year?
LNG vessels that will be ending their charters this year, I think about two or three vessels.
That's all. Thanks.
Okay. We'll take the last question. Okay. [Koh Meng], go ahead.
Hi. During the presentation, you mentioned Mero, you are in the process of the due diligence for the merger. Just to make it clear for everybody, what businesses are being completely divested and what are not? Especially for your new energy side, are those also going to be part of the process?
It's just the Offshore business. There's going to be a merger of the Offshore business.
Okay. New energy, because it's still on its own and it's not going to be part of the discussion at all at this time.
Yeah. New energy will be separate from the discussion.
Okay. All right. Okay. Thank you.
Any last thing?
That's it. That's all. We've come to the end of our briefing session. Thank you everyone for your support and your questions. Actually, quarter four has been a tough year for us, but we're making progress in our effort to rejuvenate and refresh our asset so that we can continue to ensure a more sustainable value generation going forward. Thank you very much, everyone. Have a good weekend.