Boustead says 'no significant differences' in contract to deliver six littoral combat ships

KUALA LUMPUR (June 2): Boustead Holdings Bhd said on Thursday (June 2) that its subsidiary Boustead Naval Shipyard Sdn Bhd (BNS) and the Ministry of Defence (Mindef) have entered into a supplementary contract to remobilise the RM9 billion contract for delivery of six littoral combat ships.

Among others, the remobilisation of the project will see a resumption of payment to BNS creditors, namely original equipment manufacturers (OEMs), vendors, and financial institutions, Boustead Holdings said in a filing on Thursday.

“Apart from the activities to be undertaken by BNS towards remobilising the project, there are no significant differences between the substance of the contract and the supplementary contract,” it said.

“Further developments on the above matter will be announced to Bursa Malaysia Securities Bhd in due course,” it added.

Boustead Holdings has an 82% effective stake in BNS, its annual report showed, with shares in the latter also held via Boustead Heavy Industries Corp Bhd (BHIC).

BNS was first awarded with the project in late 2011, before a formal contract was signed in 2014.

Through the project execution, variation orders (VOs) piled up and the vessel delivery was delayed from 2019, following discussions on the VOs and the way forward.

Former defence minister Muhammad Sabu reportedly said the government has paid out RM6 billion of the RM9 billion contract value, and that the project will incur additional costs of RM1.4 billion.

Comparatively, overall project completion stood at 56.67% as at July 31, 2020, according to Datuk Seri Ismail Sabri, who served as defence minister at the time. No single vessel has been fully completed.

Shares of Boustead Holdings were unchanged at 80 sen at noon market break, giving it a market capitalisation of RM1.62 billion. Year-to-date, the counter has risen by 50.94%.

BHIC shares last traded at 48 sen, giving it a market capitalisation of RM119.26 million. The counter is unchanged from the end of last year.