MTQ: 1QFY2016 hit by oil & gas slowdown, AUD depreciation - Q&A part2

Q: How will costs be cut?

Kuah Boon Wee: Natural attrition of headcount (currently 1,200) will make up the bulk of cost cutting. We will not replace personnel whose contracts end, as well as those who resign or retire.

Q: How does your order book compare with a quarter ago?

Kuah Boon Wee: Numbers started coming down in 3Q and 4QFY2015. 1QFY2016 continues this trend.

Q: Are you likely to incur a loss in FY2016?

Dominic Siu: The revenue trend is still downwards. There are many external factors at play, so it is difficult to say whether we can recover from the loss in 1QFY2016. While cash generation is lower than previous quarters because of the lower activity level, our balance sheet is very healthy. I believe we can weather the storm.

Kuah Boon Wee: Unless revenue picks up, we are looking at a loss for FY2016. New capital expenditure for the oil & gas market is quite weak at the moment. I don’t anticipate an improvement in this aspect. At this juncture, we are not promising a dividend for FY2016. 

Q: There was a S$4 million purchase of Plant, Property & Equipment in 1QFY2016. Why was there need for such a purchase under the current environment?

Kuah Boon Wee: The purchases relate to remotely operated vehicles and moulds that we mentioned last year. It takes time for these transactions to flow into the books.

We have no plans for capital expenditure in terms of equipment and M&A. You will see a lower capital expenditure trend moving forward. We have an instalment to pay for the Binder M&A. Other than that, we only have maintenance capex.

Q: What is the status for your share buyback?

Kuah Boon Wee: We bought MTQ shares to issue to staff under our employee share plan. The timing for share buyback is right as we have cash and our shares are trading below net asset value, something common for the sector currently.