MTQ Corporation Limited’s Latest Earnings: Troubled Waters to Weather  

MTQ Corporation Limited (SGX: M05) reported its fiscal fourth-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

MTQ Corporation is primarily an oil and gas equipment and services provider. For some background, the business of MTQ Corporation can be organised into three different business units – the oilfield engineering division, the engine systems division, and the Neptune division.

You can learn more about the company here or catch up with the previous quarter’s report here.

Financial highlights

Here’s a rundown on the company’s latest financial figures:

  1. Quarterly revenue for MTQ Corporation was down 19% to $63.8 million compared to a year ago. For the full financial year ended 31 March 2015 (FY2015), revenue came in at $295.6 million, down 6% compared to FY2014.
  2. For the reporting quarter, net profit attributable to shareholders fell into negative territory, coming in at -$6.5 million. For FY2015, MTQ Corporation suffered a hefty 79% decline in profit from $23.9 million in FY2014 to $5 million.
  3. With the profit picture seen just above, it’s no surprise at all to see MTQ Corporation’s earnings per share (EPS) clock in at -4.19 cents in the fourth quarter of FY2015 as compared to a profit of 3.60 cents in the same quarter a year ago. The oil and gas equipment and services provider only made 3.26 cents in EPS for the whole of FY2015.
  4. On a brighter note, quarterly cash-flow from operations was $10.2 million with capital expenditures clocking in at $5 million. This gave MTQ Corporation free cash flow of $5.2 million for the fourth-quarter of FY2015. For the full year, free cash flow was $16 million. For perspective, free cash flow for the fourth-quarter and whole of FY2014 was $4.5 million and $18.3 million, respectively.
  5. As of 31 March 2015, the company had $44.1 million in cash and equivalents and $60.4 million in borrowings. This is an improvement from a year ago, when MTQ Corporation reported $37.4 million in cash and equivalents and $65.9 million in total debt.

In all, it has been a tough quarter for MTQ Corporation.

On 27 March 2015, the company issued a profit guidance, indicating that it will incur goodwill impairment charges for the reporting quarter. As it turns out, a goodwill impairment charge of $6.8 million, arising from its Binder and Engine systems businesses, was recorded. Excluding the goodwill impairment charge, profit attributable to shareholders would actually be $11.8 million for FY2015.

On a positive note, MTQ Corporation managed to reduce its debt and was free cash flow positive for the quarter. The ability to generate cash from its business could be important for the company when it comes to weathering through the tough business environment it finds itself in at the moment mainly due to low oil prices.

For the quarter, management had proposed a final dividend of $0.02 per share (unchanged from a year ago), bringing the total annual dividend for FY2015 to S$0.04 per share (up 9% from the dividend of $0.0367 per share seen in FY2014).

Operational highlights

For the fourth quarter, revenue was lower due to weaker demand from oilfield engineering services in Singapore and Binder. For the full year FY2015, revenue was down across all business segments. The main fall in revenue was from the oilfield engineering segment which fell close to 8% from a year ago.

Kuah Boon Wee, Group Chief Executive Officer of MTQ Corporation, gave some commentary in the earnings release on the quarter and the company’s future outlook :

“In line with lower oil prices, the market outlook has turned negative for our oil and gas activities. The Singapore oilfield and Binder businesses are suffering from reduced activity levels and significant improvements are not expected in the short term. However, our Bahrain business has delivered an encouraging performance on the back of improving margins and growing market share. Neptune and Engine Systems also continued to remain profitable in competitive environments.

While oil prices will recover, we anticipate that overall capital expenditure in our industry will reduce this year. Our focus will be on securing service opportunities as work on existing projects will continue. We will remain vigilant on addressing our cost structure.

We have proposed a final cash dividend of 2 Singapore cents per share to thank shareholders for their support. As an organisation, we have seen several cycles in our businesses through the years. Financially, we are sound and we continue to proactively engage with all our customers, drawing on our track record and strengths to weather the market down turn. We remain focused on improving operational capabilities and we are confident that we will emerge as a stronger entity.”

Foolish summary

At its closing price yesterday of $0.78, MTQ Corporation traded at around 23.9 times trailing earnings with a dividend yield of 5.1% (based on its annual dividend of $0.04 per share in FY2015). Due to the annual goodwill impairment losses, the firm’s trailing PE ratio may not be a good indicator of value.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.