Why did MISC record a net loss in FY2020?

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MISC Recorded a Net Loss in FY2020 Due to Significant Impairment Charges and Litigation Provisions

MISC Bhd registered a net loss of RM43 million for the financial year ended December 31, 2020 (FY2020). This marked a significant shift from the RM1.43 billion net profit reported in FY2019. Despite an increase in revenue to RM9.40 billion from RM8.96 billion in the prior year, substantial one-off charges heavily impacted the company's bottom line.
Increased Impairment Losses Affected Financial Performance

The company reported a higher impairment loss on its assets, including ships, offshore floating assets, and other property, plant, and equipment, amounting to RM331.4 million in FY2020. This figure is considerably higher than the RM214.9 million recorded in FY2019. This increased impairment was a direct result of an assessment of the impact of the Covid-19 pandemic and the depressed oil price environment on the Heavy Engineering business, as many oil and gas companies were expected to defer upstream projects and reduce capital expenditure.
Significant Provision for Litigation Claims and Receivables Write-off

A substantial provision for litigation claims, totalling RM1.05 billion, was recognised following a decision by the Arbitration Tribunal regarding the group’s arbitration proceedings against Sabah Shell Petroleum Ltd. In addition to this, MISC also recognised a write-off of trade receivables and a loss on the re-measurement of finance lease receivables amounting to RM846.2 million. These provisions and write-offs significantly contributed to the net loss for the financial year.
LNG Segment Revenue and Profit Saw Modest Growth

While the overall financial results were negative, the liquified natural gas (LNG) segment demonstrated resilience. Revenue from this segment rose by 2.7 per cent in FY2020 to RM2.65 billion, driven by an increase in earning days due to fewer dry-docking periods. The operating profit for the LNG segment was RM1.19 billion, a slight increase of RM600,000 compared to the previous year, though this was offset by higher vessel operating costs incurred during the year.
Higher Share of Profit from Joint Ventures Partially Offset Losses

The financial impact of the impairment charges and litigation provisions was partially mitigated by an increase in the share of profit from joint ventures and an associate. This share rose to RM429.0 million in FY2020, up from RM250.6 million in FY2019. This improvement was largely attributed to the recognition of a one-time gain from a contract extension secured by these entities during the year.

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Why did MISC record a net loss in FY2020?

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