Wintermar Offshore (WINS:JK) Reports 1H2024 Results

Total Revenues rose steadily by 22.9%YOY to US$38.3million for 1H2024, contributed by a strong 41.5% YOY increase in Owned Vessel revenue which rose to US$27.2million in 1H2024 compared to US$19.2million in 1H2023. This is attributable to the continued rise in OSV charter rates which on average are 39.8% higher in 1H2024 compared to the average for 1H2023. 

Owned Vessel Division

In the first half of 2024, Gross Profit from Owned Vessel jumped by 153.9%YOY to US$8.0 million on the back of Owned Vessel Revenue of US$27.2 million compared to US$19.2 million in 1H2023. The significant growth was primarily due to higher charter rates along with an increase in fleet utilization from 61% in 1H2023 to 67% in 1H2024.

2Q2024 Revenue remained strong despite the sale of one Platform Supply Vessel (PSV), one Fast Utility Vessel (FUV), and one Anchor Handling Tug (AHT) during the quarter, reflecting the strength of the underlying market as higher charter rates were able to compensate for fewer operational vessels in 2Q2024 compared to 1Q2024. 

There were some positive developments in the High Tier Vessel segment in the second quarter. Two PSVs ended a long term contract at the end of April 2024, after which one was re-contracted at market rates more than double of the previous charter rate, while the other underwent major docking. An older PSV was sold in April at an opportunistic price at nearly double of her book value.  Despite having sold three vessels in 2Q2024, the gross profit for 2Q2024 was slightly higher on a QOQ basis at US$ 4.1million compared to US$3.9million in 1Q2024.  This reflects the strength of the market demand for these vessels. 

Owned Vessel Direct Expenses rose by 19.3% YOY, reaching US$19.2 million from US$16.1 million in 1H2023. The increase was primarily due to higher maintenance costs (+ 78.2% YOY) from US$2.3 million in 1H2023 to US$4.1 million in 1H2024.  This arose due to the preparation of a higher tier vessel for overseas work and a major docking for one PSV following the end of her long-term contract. Operational Costs grew by 19.0% YOY, from US$1.9 million in 1H2023 to US$2.3 million in 1H2024, due to a growing number of vessels working outside Indonesia where agency and other costs are higher. Crewing Expenses also increased by 15.3% YOY, rising to US$5.0 million from US$4.4 million in 1H2023, accounting for higher salary and allowances for crew working internationally. 

Chartering Division and Other Services

The Chartering division experienced a 4.5%YOY growth in margins which resulted in slightly higher Gross Profit of US$0.7million despite lower Revenues of US$7.5 million (-8.1%YOY) in 1H2024.  This was due to a lower number of chartered vessels, after the Company purchased a previously chartered vessel. 

Similarly, Gross Profit from the Other Services Division rose slightly to US$1.64million in 1H2024 compared to US$1.62million in 1H2023 despite a 4.5%YOY decline in revenue to US$3.7million. 

Total Gross Profit for 1H2024 stood at US$10,4 million up by 91.4%, almost doubling from US$5.4 million in 1H2023.

Indirect Expenses and Operating Profit

Total Indirect Expenses increased by 53.6%YOY, rising from US$3.0 million in 1H2023 to US$4.6 million in 1H2024. This increase was primarily driven by increase in staff salaries and employee benefits.

Staff salaries rose by 35.9% YOY, from US$2.5 million in 1H2023 to US$3.4 million in 1H2024, due to a growing workforce in line with business expansion and bonuses paid in 2Q2024. Employee benefits reverted back to an expense of US$0.2 million in 1H2024, after an adjustment in 2023 to comply with changes in the Omnibus Law resulted in reversal from an income of US$0.2 million in 1H2023. 

Operating Profit for 1H2024 was US$5.7 million, which increased 136.0% compared to the same periode in previous year.  The operating margin rose to 15.0% in 1H2024 compared to 7.8% in 1H2023. 

Other Income, Expenses and Net Attributable Profit

Interest Expenses continued to fall from US$0.55 million in 1H2023 to US$0.45 million in 1H2024(-17.2%YOY), as outstanding bank debt shrank. The Company is now cash positive, leading to a six-fold increase in interest income from US$0.02 million in 1H2023 to US$0.15 million in 1H2024. Cash Inflows came from improved operations and vessel sales.

Equity in net earnings of associates saw a turnaround, moving from a loss of US$0.1 million in 1H2023 to an income of US$0.8 million in 1H2024. This improvement was due to better operational performance from our associated companies as the industry recovers.

The sale of vessels led to a significant gain from sale of fixed asset of US$17.4 million in 1H2024, which crystallised the monetary value of the fleet. This contributed cash flow which management is actively seeking to reinvest into similar but younger vessels.

The strong performance of the business resulted in a net income attributable to shareholders of US$13.4 million for 1H2024, compared to US$1.1 million in the same period of 2023.  Excluding the impact of vessel sales, the core profit for the 1H2024 period amounted to US$4.9million. On a quarter to quarter comparison, excluding the impact of vessel sales, 2Q2024 recorded core net profit of US$2.8million as compared to USD2.1million in 1Q2024.  

The group's EBITDA also jumped by 46.5% YOY for 1H2024, reaching US$12.7 million.

Industry Outlook

According to the International Energy Forum (IEF) and S&P Global, oil demand is expected to reach nearly 110 million barrels per day (mb/d) by 2030 before gradually declining to approximately 100 mb/d by 2050. This trajectory highlights the critical need for sustained investment in the energy sector, as there is a growing awareness of the significant energy requirements in the interim period as the world transitions from fossil fuels to renewable energy.  The high demand for steel and rare minerals to produce electric vehicles and batteries, coupled with the recent slowdown in electric vehicle (EV) adoption highlight the uncertainty of future oil demand. 

In the past half year, the offshore oil sector has benefitted from more favorable economic conditions, as lower breakeven costs for upstream projects encouraged continued investment in offshore oil and gas exploration, particularly in regions rich in untapped reserves. Concurrently, the Offshore Support Vessel (OSV) market is experiencing dynamic growth driven by demand from escalating offshore activities in the oil and gas sectors globally. Within the offshore sector, there is an emphasis on deepwater and ultra-deepwater exploration which has heightened the need for advanced OSVs capable of operating in these challenging environments.

According to Rystad Energy's latest analysis, Offshore gas production in Southeast Asia is set to unlock a US$100 billion potential, driven by a surge of planned final investment decisions (FIDs) expected by 2028. This marks a significant increase over the US$45 billion-worth of projects sanctioned between 2014 to 2023. Deepwater developments, significant offshore Indonesian and Malaysian discoveries and advancements in carbon capture and storage (CCS) bode well for the longer-term sustainability of offshore activity in the region.

Looking ahead, a major issue facing the offshore support vessel (OSV) industry is the scarcity of new vessel constructions and exacerbated by an aging fleet, particularly among the larger vessels crucial for deepwater operations. This condition makes the market even tighter, pushing charter rates higher due to high demand and limited new vessel entries.

Business Prospects

Wintermar is strategically strengthening its financial position and expanding its asset base. In the first six months of 2024, the Company invested in three additional vessels worth US$13.9 million, of which two are new built heavy load barges which will be delivered at the end of this year. These investments position Wintermar's fleet in segments with anticipated higher demand in the coming years.  These vessels will be required as the initial drilling and exploration projects which recently began gradually move into the construction and production phases of the cycle.  

In June, the Company secured a two-year project for two PSVs at charter rates more than double of the average rate in 2023 for similar vessels. This contributed to a jump in the contracts on hand at the end of June 2024 to US$75million as can be seen in the following chart. 

This is the first award of a long-term tender for PSVs in Indonesia in several years and confirms our positive outlook that the growth cycle is firmly in place.  As long term contracts are awarded on a tender basis, the Company's contracts on hand cannot be expected to follow a smooth gradient.  

Subsequent Events

In July, the Company entered into a 50:50 joint venture to own and operate an accommodation work barge(AWB) with 300 passenger capacity with a third party, PT Rajawali Perak Mulia, a company with years of experience in this segment.  The vessel is currently operating in Thailand and augments the Company's service offering in the offshore space.  

About Wintermar Offshore Marine Group

Wintermar Offshore Marine Group (WINS.JK), developed over nearly 50 years with a track record of quality that is both a source of pride and responsibility that we are dedicated to upholding, and sails a fleet of more than 48 Offshore Support Vessels ready for long term as well as spot charters. All vessels are operated by experienced Indonesian crew, tracked by satellite systems and monitored in real-time by shore-based Vessel Teams.

Wintermar is the first shipping company in Indonesia to be certified with an Integrated Management System by Lloyd's Register Quality Assurance, and is currently certified with ISO 9001:2015 (Quality), ISO14001:2015 (Environment) and OHSAS 18001:2007 (Occupational Health and Safety). For more information, please visit www.wintermar.com .

For further information, please contact:
Ms. Pek Swan Layanto, CFA
Investor Relations
PT Wintermar Offshore Marine Tbk
Tel (62-21) 530 5201 Ext 401
Email: investor_relations@wintermar.com