CEO'S STATEMENT - Otto Marine Limited

CEO’S
STATEMENT
Dear Shareholders,
I am pleased to present the first Otto Marine annual report, and to
report that in our first year as a listed company, we have turned in
a strong performance for the full year ended 31 December 2008
(“FY2008”).
Review of FY2008 financial performance
The Group achieved 54% growth in revenue in FY2008 to S$483.6
million from S$314.0 million in FY2007. The increase was contributed
by the shipbuilding business, which benefited from an increase in
the number of vessels constructed, particularly from the larger and
more complex vessels, which are of higher value; as well as the
chartering business, which benefited from the recognition of the
full twelve months of revenue in FY2008 compared to FY2007 as
our Group only commenced our ship chartering business in April
2007. Revenue from shipbuilding rose 58% from S$286.0 million in
FY2007 to S$453.1 million in FY2008, whilst revenue from chartering
increasing 74% from S$9.3 million in FY2007 to S$16.1 million in
FY2008. The increase in Group revenue was however partially offset
by a 23% decrease in revenue from the ship repair and conversion
business from S$18.8 million in FY2007 to S$14.4 million in FY2008
as we shifted our focus away from ship repair and conversion to
shipbuilding.
Gross profit margin in FY2008 remained stable at approximately
26%. However net profit margin was impacted by higher foreign
exchanges losses, finance costs, administrative expenses and
reversal of unrealised profit on sale of vessels. Notwithstanding the
decline in net profit margin, net profit for FY2008 was up 12% from
S$53.7 million in FY2007 to S$60.0 million in FY2008. Meanwhile,
earnings per share in FY2008 rose 33% to 5.72 Singapore cents,
from 4.30 Singapore cents in FY2007.
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OTTO MARINE LIMITED
Our balance sheet remained strong with S$248.7 million of cash
and cash equivalents and Group net asset value per share of
18.55 Singapore cents as at 31 December 2008.
Our shipbuilding business
We build a range of small, medium and large offshore support
vessels, including Anchor Handling Tug Supply (“AHTS”)
vessels, Platform Supply Vessels (“PSV”), work barges with
accommodation for 300 people, and work maintenance boats.
We have a strategic focus on higher value, higher margin,
complex and sophisticated offshore vessels which comply with
technical specifications required to operate in the North Sea. We
selectively outsource the construction of small to medium offshore
support vessels to third party shipyards in China whilst the higher
value offshore support vessels are constructed at our shipyard in
Batam, Indonesia, which is one of the largest shipyards in Batam
with approximately 40 hectares of land area and 450 metres of
usable waterfront.
We adopt a total solutions approach to shipbuilding, which means
we provide our customers with turnkey solutions from the selection
of design to project specification, procurement, construction,
system installation and integration, testing, commissioning to
warranty support. Our turnkey approach enables us to provide
greater value-added customised solutions to our customers.
In the fourth quarter of FY2008, new ship orders have slowed due
to the global economic downturn but none of our orders were
cancelled. As at 31 December 2008, the Group’s order book
stood at S$799.2 million, comprising of 22 vessels, which include
14 AHTS vessels, four PSVs, two utility vessels, one offshore
construction vessel and one accommodation work barge. Cash
deposits of between 20% to 30% have been collected for all
vessels in the order book.
Our focus in 2009 for our shipbuilding business will be on the
execution and completion of vessels in our order book, which
will translate to sales proceeds that will help to boost our cash
inflows and further strengthen our financial position. We are off to
a good start, having already completed delivery of, and received
full payment for a vessel in the first two months of 2009.
Our ship chartering business
Our chartering business is largely focused on the chartering of
offshore support vessels and we operate the business via our
wholly-owned fleet as well as through strategic partnerships in
which we own a minority stake. Entering into such strategic
partnerships enable us to tap into the expertise of our strategic
partners, who are involved in chartering of different types of
offshore vessels in different markets and locations, thereby
allowing us to penetrate new markets faster and at higher charter
rates than if we go alone.
Our chartering business provide our Group with a long term
steady flow of income, and is in line with our business strategy
of broadening our revenue base. As at 31 December 2008, our
fleet comprises five 3,600 Horsepower tugboats, and five 10,000
Deadweight Tonnes (“dwt”) high-deck loading barges, all of
which are on time charter. We also own one work barge with
accommodation for 300 people through our strategic partnership
that is on time charter. In addition, we have entered into time
charter contracts for two 61m maintenance vessels, and bareboat
charter agreements for two 6,000 bhp AHTS vessels, all of which
are currently under construction.
In 2009 our emphasis for our ship chartering business will be
on expanding our chartering fleet. We have 11 vessels, which
comprise two maintenance vessels, five tugs, two 6,000 bhp
AHTS vessels and two work barges with accommodation for
annual report 2008
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We believe that the long term outlook for the offshore marine
industry remains positive, and are cautiously confident that we
will be able to ride through the current economic situation and
emerge stronger and well-positioned for growth.
300 people, that will be completed in 2009 to add to our chartering fleet. Also under
construction are nine vessels that have been sold to our strategic partners, and eight
vessels that are intended for sale to our strategic partners.
Our ship repair and conversion business
Our Batam shipyard offers comprehensive “one stop” facilities for both ship repair and
conversion works. We service a wide range of vessels including offshore support vessels,
ocean-going tugs, car ferries and general cargo ships.
Whilst we have shifted our focus away from the ship repair and conversion business in
FY2008, the business is important to our strategy of broadening our revenue base. In the
event of a slowdown in the shipbuilding business, we will be able to diversify our sources
of income by reallocating our resources and capacity to increase our ship repair and
conversion business.
Business outlook
Although market and economic conditions are expected to remain difficult in 2009,
we are optimistic that we will perform despite the environment. We will continue to be
conscious of costs, and plan to review and further streamline our production process this
year in line with our continuing and ongoing efforts to improve efficiency and productivity.
Nonetheless, we believe that the long term outlook for the offshore marine industry
remains positive, and are cautiously confident that we will be able to ride through the
current economic situation and emerge stronger and well-positioned for growth.
Lee Kok Wah
Chief Executive Officer and
Group Managing Director
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