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NRA Capital Pte Ltd

Written by: NRA Team

Tuesday 13 Aug 2013

Kreuz Holdings - 2Q13 results review

The view from under the sea looks bright

Kreuz 2Q13 net profit increased 9.6% yoy to US14.6m on increase in turnover of 24.7% yoy to US$76.4m. The increase in revenues was due to rise in offshore subsea, umbilical, risers and flowlines (SURF) activities.

Kreuz 2Q13 net profit increased 9.6% yoy to US14.6m on increase in turnover of 24.7% yoy to US$76.4m.   The increase in revenues was due to rise in offshore subsea, umbilical, risers and flowlines (SURF) activities.

Key takeaway from results briefing:

  • 2Q13 Gross profit margins decreased 1.1% pts yoy to 29.2% due to higher chartering expenses incurred for projects.
  • Current order book stands at US$145m, excluding any variation orders.
  • Awaiting delivery of a new Dynamic-Positioning Multi Purpose Support Vessel (DP MSV) in 2015, with an option for another identical vessel from a PRC based shipyard.
  • The new vessel will be able to complement Kreuz’s capabilities in performing deepwater SURF activities in addition to its shallow water projects.
  • The new vessel will also complement its currents assets of DP MSV, construction and accommodation barges, Remotely Operated Vehicles (ROV), saturation and air diving systems.
  • All vessels are operating at almost full utilization rate.
  • It completed its first subsea dry hyperbaric habitat welding project at water depths of 140 meters, a milestone for the group considering the technical challenges of welding at deep depths.

Our view:

Oil and gas companies continue to spend on capital expenditure and the trend seems to indicate that there they are more willing to go towards deeper waters, which will ultimately benefit Kreuz as this is where they are currently building up their capabilities, on top of their strength in shallow water sub sea works.  We believe that Kreuz’s capabilities are top notch and hence can explain their relatively consistent margins, with most of the drop in gross margins attributable to higher chartering rates for third party vessels.

We are of the view that once it accepts delivery of its new DP MSV in 2015, it should give the group more leg room for the jobs that it undertakes, and believe that it would benefit margins.  Given the continued capex in the oil and gas industry, we think that the group will exercise the option for the second vessel.  In addition, Swiber recently announced a US$435m contract win which will translate into more orders for Kreuz. 


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