Contract issues dent MMA earnings

Marine services company MMA Offshore expects to take a $10 million hit to its earnings after striking trouble with two of its vessel contracts.

Fremantle-based MMA said a key contract in South-East Asia covering two of its vessels had been suspended after its client ran into issues during a drilling campaign.

“MMA is working to mitigate the impact of this suspension by seeking alternative deployment for the vessels,” the company said in a statement.

“However, the rates of utilisation for these vessels are expected to be significantly lower than our original expectations as a result of this development.”

MMA also said it would take an earnings hit from a contract renegotiation over a three-vessel operation for a client in the Middle East.

The two material developments will reduce MMA’s earnings before interest, tax, depreciation and amortisation by $10 million for FY17, with the company unsure if it will be able to recover the shortfall due to current market conditions.

“MMA is in ongoing dialogue with its banking syndicate which continues to be supportive of the company in what is a very challenging market,” it said.

The contract issues won’t be welcome news for MMA investors, who were warned in June that FY17 would be another challenging year for the business.

MMA’s FY16 results are yet to be released, however the company has already flagged a $140 million impairment with the majority of the charge to be attributed to its vessel fleet.

MMA shares were down 8.8 per cent to 31 cents each at 11:20am.