Tough year ahead for MMA

Shares in marine services business MMA Offshore were lower after the company warned of a profit reduction and no reprieve in the coming financial year.

Perth-based MMA said this morning that its earnings before interest, tax, depreciation and amortisation would be ‘slightly lower’ than its previous guidance of between $75 million and $85 million, after taking into account $3.5 million in redundancy costs and $7 million in provisions against outstanding debtor balances.

It also said the extremely challenging conditions experienced during FY16 would continue into the first half of FY17.

“Based on the current forecast fleet utilisation and rate levels, we expect EBITDA to be significantly lower than the broker consensus forecast for the year,” MMA said in a statement.

“The offshore oil and gas vessel market continues to remain under significant pressure due to low oil prices and substantially reduced demand for services across all sectors of the market.”

Shares in MMA were 11.2 per cent lower to 35.5 cents each at 10:30am.

MMA also said it was in discussions with its lenders over the need to borrow more cash to fund its ongoing capital requirements.

“MMA continues its focus on its asset sales program to reduce debt and on streamlining the business through reducing costs, increasing productivity and improving operating performance,” it said.

“Asset sales have become increasingly difficult in the prevailing market. As a result, vessel sales for FY16 will be below the $78 million target.”

While the company expects FY17 to be impacted by low demand and low charter rates, MMA was more positive on FY18.

“There is increasing evidence that the fundamentals of the oil and gas market are moving back towards balance and MMA remains well positioned to benefit when the market starts to recover,” the company said.

“There is a lag between a recovery in the oil price and an increase in demand for MMA’s services; however, we are at least seeing some improvement in the core market, which is anticipated to flow through to the company’s core client base.”