MMA Offshore sends profit warning, shares drop


Share price drop as company predicts a slow start to fiscal 2017

MMA Offshore sends profit warning, shares drop
MMA Offshore is facing heavy weather.

 

Western Australia based oil and gas logistics company MMA Offshore’s shares dropped from 36.5 cents yesterday to 31 cents after the company issued a bleak business forecast for the 2017 financial year (FY2017).

It blames low oil prices and reduced demand for services across all sectors of the market for continued pressure on the offshore oil and gas vessel market.

The company expects annual earnings before interest, tax, depreciation and amortisation to be slightly lower than prior guidance of between $75 million and $85 million after accounting for around $3.5 million in costs tied to redundancies and provisions against outstanding debtor balances of approximately $7 million.

"It’s probably the first time in 30 or 40 years that we’ve had two consecutive years of global exploration and production down by 20 per cent to 25 per cent year on year," MMA Offshore MD Jeff Webber says.

While MMA expects the "challenging" trading conditions to continue during the first half of FY2017, it remains hopeful that the additional new vessels will offer financial gains in the months to come.

The company states it will not be able to sell off assets to raise $78 million by the end of this month as planned – part of its asset sales strategy aimed at reducing existing debt.

"Asset sales have become increasing difficult in the prevailing market," a company statement reads.

"As a result, vessel sales for FY2016 will be below the $78 million target identified in the company’s half year financial report dated February 19, 2016.

"Accordingly, the company is in dialogue with its banking syndicate in relation to its ongoing capital requirements."

MMA has seen a significant reduction in staff numbers in the past year in an attempt to reduce expenditure.

"There’s no silver bullet that gets us out of this other than the market getting better, and there’s more spending and more activity," Webber says.

The company expects to see market improvements in FY2018 driven by underlying market fundamentals.

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