Below is a summary of questions raised at the teleconference, and the replies provided by Mr Kuah and CFO Dominic Siu.
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Q: Why was there a sharp decline in gross margin? Kuah Boon Wee: There was margin pressure because of competitive pricing. Most of the decline is related to the Singapore side of the business. Binder’s margins have improved because of lower feed prices and relatively unchanged product prices. Q: Will the competitive pricing pressure affect your second and third quarter? Kuah Boon Wee: It is not logical to assume that things will bounce back in the short term. If you are cautious about winning work in an environment of low business activity, you have to price yourself sensibly and make sure that you can win work at margins that make sense. Q: What is the revenue breakdown?
Dominic Siu: Group revenue was about S$60 million and Neptune generated slightly more than half of that. The oilfield engineering division (Bahrain, Binder and Singapore) generated about a quarter. The engine systems division generated slightly less than 20%. Kuah Boon Wee: Bahrain’s top line has grown, reflecting resilient demand in the region. However, we are facing yield pressures. Revenue in Aussie dollars from engine systems and Neptune remained unchanged, but we booked a currency translation loss of about 10% arising from the AUD-SGD depreciation. Most of the revenue decline was from lower business volume in the oilfield engineering business from Singapore. There was significant year-on-year reduction in 1QFY2016 revenue from the Singapore side of the business. |
