Choppier seas ahead for Ezra after unexpected Q3 loss

It's all doom and gloom in coming quarters.

There are choppier seas ahead for Ezra after its unexpected $4m (US$3m) loss in the third quarter, which fell way below consensus expectations of a $24.32m (US$18) profit.

“Weak utilisation, OSV rate pressure and lower margin on new subsea contracts point to a grim outlook,” said Lim Siew Khee, analyst at CIMB.

Lim also warned that new contracts are being closed at 8-10% gross margins given the current challenging environment, while the decline in global charter rates and heavy financing costs have also caused Ezra’s margin to plunge from the historical level of around 30%.

OCBC analyst Low Pei Han noted that while FY16 could see an uptick in new project awards, it will take time before new contracts are executed.

“From a financial standpoint, FY15 and FY16 may be lacklustre years, as time will be needed to execute any newly secured contracts. Time may also be needed for the group to build up its subsea division, compared to its more established competitors, though much has been achieved within this short span of five years,” Low said.

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