Ezion reports 4Q18 loss after tax widened as utilization and charter rates fell

Offshore and marine vessel company Ezion Holdings reported on Friday its fourth quarter loss after tax widened to US$390.83 million (S$529.65 million), from a loss of US$331.13 million in the year-earlier quarter as utilization and charter rates fell and amid an industry credit crunch.

“The overall market conditions remains challenging for the group due to the uncertainty in the oil prices that has affected the group’s clients as well as the persistent oversupply of certain marine assets like tugs, barges, workboats and jack ups,” Ezion said in its outlook.

Revenue for the quarter ended 31 December fell 33.5 percent on-year to US$29.72 million, it said in a filing to SGX on Friday.

The decline was largely due to a drop in utilization rates of liftboats and jack-up rigs due to continued delays in re-deployment amid working capital constraints as it awaits finalization of revolving credit facilities, Ezion said. Charter rates for its vessels also have fallen, it said.

Ezion said it also faced pressure from a systemic credit crunch hitting shipyards, equipment suppliers and service providers it uses.

“The tighter credit terms imposed by these vendors coupled with the inability of the group to drawdown the required funds from its secured lenders has severely affected the group’s ability to operate, maintain and deploy its vessels,” Ezion said.

The cost of sales and services also jumped 23.3 percent on-year in the fourth quarter to US$27.7 million, mainly on higher maintenance costs for vessels delayed in re-deployment, Ezion said.

For the full year, Ezion reported a loss after tax of US$344.34 million, wider than the year-earlier loss of US$323.09 million, on revenue of US$118.70 million, down 38.5 percent on-year.

The results contained a going-concern note that Ezion has net liabilities of US$254.8 million as of end-December, mainly on losses during the year. But the company said that despite the net liability position, it believed a going-concern assumption was appropriate because it is still generating positive operating cash flows and it is able to meet its short-term obligations as they fall due.

It added that the earliest bullet repayment on the group’s borrowings isn’t due until November 2023, providing a runway to reduce debt to a sustainable level.

Ezion said it would “endeavor to engage closely” with secured lenders to expedite accessing additional revolving credit facilities to deploy its vessels back to work. It added that it was in talks with potential strategic investors.

“The availability of funds from the lenders will also be crucial to the group’s ability to put its mainly production related asset into deployment to meet the requirement from its clients,” it said.

Ezion requested a voluntary suspension of its shares on Friday. 

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