Rotary Engineering (Rotary), leading provider of engineering, procurement, construction and maintenance services to the oil and gas petrochemical industries posted a two percent increase in its 1Q12 revenue of $133.4 million year-on-year. However, profit attributable to shareholders tanked forty-one percent to $3.2 million as compared to 1Q11.
In the results briefing which Shares Investment attended, Rotary revealed that the slight dip in gross profit margin was mainly due to thinner margins for a few projects secured at exceedingly competitive prices, where the weakening dollar also caused a considerable translation loss of $4.6 million.
In addition to that, Rotary mentioned that the fairly flat results this time round did not take into full account of its on-going projects, as the reporting quarter closed before it was able to get started on projects which had been delayed.
Albeit the competition, Rotary is currently working on two major EPC contracts in the Middle East: a US$745 million EPC contract from Saudi Aramco Total Refining and Petrochemical Company (SATORP) in Saudi Arabia, and a US$250 million contract for Fujairah Oil Terminal in the United Arab Emirates. The expected completion date for SATORP will be 4Q12 and 1Q14 for the Fujairah Oil Terminal.
“The Middle East will remain a key market. Rotary has been there since 2006 and we plan to be there for the long term,” stressed Chia Kim Piow, chairman and chief executive officer of Rotary.
When Shares Investment asked if Rotary might be looking for a significant influence in terms of stake involvement should the business opportunity arise for it to be part of its projects, Chia maintains that Rotary does not want to have any significant influence in the projects, in honour of the rest of its clients, and that it does not wish to be seen as a threat (competition) to them.
“My team is extremely busy. The activity level in the market is very high. Our aim is to stay focused, mining every opportunity that comes along and doing our utmost to secure contracts,” Chia added.
With the recognition of projects gradually pouring through and the expected completion of SARTOP this year, FY12 might just get the upbeat Rotary is waiting for.