Quarterly Profits Down 6% at Ezra Holdings Limited

Ezra Holdings (SGX: 5DN) is one of the leading offshore contractors and solution providers for the oil and gas industry in Singapore. It operates in three divisions: offshore support services; marine services; and subsea services. Last Friday, Ezra Holdings released its first quarter results for the three months ended 30 Nov 2013.


Ezra reported a 22% year-on-year increase in quarterly revenue to US$340m on the back of higher contributions from the subsea services division


Despite double-digit gains in revenue, Ezra’s gross profit for the quarter only managed to inch up by 1% to US$50.6m. That’s because the subsea services division tends to have lower gross margin, and since much of the revenue growth the company saw was due to that particular division, gross margins suffered.

Marginally higher gross profits, in addition to a much lower “other operating income”, dragged Ezra’s quarterly operating profit down by 15% to US$17.4m.

All told, the company ended the quarter with US$6.3m in profits that are attributable to shareholders, some 6% lower compared to a year ago.

Balance Sheet

The current ratio for the comapny decreased slightly from 1.13 a year ago to 1.07. Meanwhile, Ezra’s debt to equity ratio had increased from 102% to 108% as there has been an increase in bank loans. In addition, last September also saw Ezra add to its own total debt load with the issue of S$25m worth of Fixed Rate Notes that are due in 2015.

Convertible Bonds Outstanding

Ezra’s current balance sheet shows US$49.6m worth of convertible bonds. These bonds can be converted to about 41.6million new shares in total. With current outstanding shares at 974.5m, this might lead to a dilution of about 4% to the total shares outstanding.

Foolish Bottom Line

The management of Ezra Holdings continues to reinvest heavily in the business and spend big on capital expenditures.. With a strong book order at around US$2b, Ezra might be kept busy for the next few years. However, as its debt load increases, the cost of financing – i.e. interest payments – might put a drag on its earnings in the future.

Ezra Holdings closed at S$1.26 yesterday, dropping 8.7% since the beginning of the year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.