WZ Satu plans workforce right-sizing as it falls into the red in FY18

KUALA LUMPUR: WZ Satu Bhd reported a net loss of RM77.6 2million or a loss per share of 16.69 sen in its fourth quarter ended Aug 31, 2018 (4QFY18), compared with a net profit of RM3.49 million or 1 sen per share a year ago, after key segments reported losses.

Quarterly revenue shrank 22% to RM116.82 million from RM150.38 million, mainly due to lower contribution from its oil and gas segment, according to the group’s quarterly results filing today.

The O&G segment recorded a pre-tax loss of RM46 million while its civil engineering and construction segment incurred a pre-tax loss of RM17.1 million; its mining segment also recorded a pre-tax loss of RM15.6 million.

WZ Satu said the losses incurred in the O&G and civil engineering and construction segments were contributed by cost overruns arising from disputes involving its works on the Refinery and Petrochemical Integrated Development (RAPID) project at Pengerang, Johor, and Section 9 of the West Coast Expressway, in Perak.

“The group is currently in negotiations with its respective clients for amicable resolutions which are likely to have a significant positive impact on group results, pertaining to the two projects mentioned above,” it added.

For the mining segment, the group said the pre-tax loss was because of an impairment of mining assets which amounted to RM14.4 million, due to the prolonged uncertainty in the lifting of the bauxite mining moratorium and export ban.

The group also recorded an impairment of goodwill of RM25.1 million to reflect the changes in the  accounting treatment under the Malaysian Financial Reporting Standards (MFRS) 136.

For the full FY18, WZ Satu slipped into the red for the first time in six years. It posted a net loss of RM84.19 million or loss per share of 18.1 sen against a net profit of RM25.41 million or earnings per share of 7.29 sen in FY17. Revenue dropped 10% to RM501.76 million from RM560.45 million.

Moving forward, WZ Satu said it is looking to venture into onshore and downstream long-term service contracts, including maintenance, plant turnaround and plant/facility improvement programmes to generate sustainable jobs by maximising facilities and resources.

“Should the bauxite mining moratorium and export ban not be extended beyond Dec 31, 2018, the group anticipates this segment to contribute positively,” it added.

In view of the challenging times, the group said it has started a cost reduction exercise to enhance its operational efficiency. The exercise will be followed by a right sizing of workforce and the rationalisation of resources throughout the group.

WZ Satu shares closed unchanged at 20.5 sen today, valuing the group at RM95.36 million. The stock has sank nearly 75% from a year ago.