KUALA LUMPUR (June 12): Boustead Heavy Industries Corp Bhd (KL:BHIC) said it has secured a RM1.1 billion contract from the Ministry of Defence to provide in-service support 2 performance for the Royal Malaysian Navy’s prime minister class submarines.

A formal contract between the the government and BHIC's wholly owned subsidiary, BHIC Submarine Engineering Services Sdn Bhd (BSES), will be executed at a later date, said BHIC in a filing with Bursa Malaysia on Wednesday.

The Armed Forces Fund Board (LTAT) owns 64.99% of BHIC via Boustead Holdings Bhd. LTAT fully owns Boustead following a privatisation exercise last year.

Loss-making BHIC said the contract will positively impact its earnings for the financial year ending Dec 31, 2024 (FY2024).

The group reported a net loss of RM6.67 million for the first quarter of FY2024 after posting a net loss of RM6.5 million for the same period of the previous year, due to higher operating costs and lower contributions from joint venture companies amid lower customer demand.

However, revenue for the quarter rose to RM19.15 million from RM6.36 million previously, attributed to positive variations in the milestones achieved for submarine contracts.

Last month, BHIC sold its 20.77% stake in the troubled Boustead Naval Shipyard Sdn Bhd (BNS) — now Lumut Naval Shipyard Sdn Bhd — to the Ministry of Finance (MOF) for RM1, giving MOF full control of BNS.

Previously, MOF, through Ocean Sunshine Bhd, held a 79.23% stake in BNS.

Initially, the disposal was set for completion by Oct 3, 2023, but it was extended by nearly seven months and finalised in May.

This stake sale is part of the government's strategy to assume full control of the RM9.13 billion littoral combat ship project, which BNS failed to deliver on time and at the initially budgeted cost. Additionally, it aims to settle the repayment of RM383.94 million or any other amounts BNS owes to BHIC.

At Wednesday’s closing bell, shares of BHIC were five sen or 1.03% lower at 48 sen, giving the group a market capitalisation of RM268.09 million.