Dialog's 4Q net profit falls 15% on higher project cost, losses in some projects

KUALA LUMPUR (Aug 18): Dialog Group Bhd's net profit fell 14.65% to RM118.25 million for the fourth quarter ended June 30, 2022 (4QFY22), from RM138.54 million a year earlier, on higher project cost and losses in some of the projects under both its local downstream and international businesses.

Earnings per share slipped to 2.1 sen from 2.46 sen previously, the group's Bursa Malaysia filing on Thursday (Aug 18) showed.

Quarterly revenue however rose 29.4% to RM675.65 million from RM522.14 million following increased business activities in both local and international operations.

For the full FY22, Dialog saw its net profit drop 6.47% to RM508 million from RM543.14 million in the previous financial year, despite revenue rising 44.04% to RM2.32 billion from RM1.61 billion.

Dialog said the higher revenue reported by its local operations for 4QFY22 was due to increased activities in the upstream, midstream and downstream activities.

The upstream activities benefitted from the higher oil prices, while Dialog Terminals Pengerang (5) Sdn Bhd's storage tanks, with a storage capacity of 430,000 m3 and dedicated for use by BP Singapore Pte Ltd, contributed to higher revenue for the midstream business.

In the downstream business, Dialog said its local operations were busy with various engineering, construction, fabrication, and plant maintenance projects.

"These projects are currently ongoing. However, they are facing unprecedented challenges due to the Covid-19 pandemic, conflict in Ukraine, inflationary pressure and manpower constraints.

"The unexpected Covid-19 pandemic and the stringent SOPs (standard operating procedures) introduced worldwide caused severe supply chain disruption, higher material price and labour cost," it said.

Despite these challenges, Dialog said its main priority was to complete and deliver the committed projects, which inevitably resulted in cost overruns and project losses.

As such, discussions are currently ongoing between Dialog and its clients for reimbursement and compensation for these project overruns caused by said challenges.

On the international front, Dialog saw increased engineering, construction and plant service activities in Singapore and higher sales of specialist products and services in various countries during 4QFY22.

"However, the net profit after tax was lower because of the challenging environment. Similar to Malaysia, we are in discussion with our clients for reimbursement and compensation for these project overruns and losses caused by these challenges," it said.

Dialog has proposed a final dividend of 2.1 sen per share.

Looking ahead, Dialog remains confident that its business model is well structured to manage and sustain itself through periods of economic uncertainty, oil price volatility and currency movements.

In addition to the pandemic, the group observed that the conflict in Ukraine has caused the global economic outlook to remain cloudy and show signs of deterioration.

As such, Dialog has maintained a prudent approach to deal with the risks and taken proactive steps in managing the group's finances.

Dialog's share price ended unchanged at RM2.42 on Thursday, bringing a market capitalisation of RM13.7 billion.