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Marco Polo Marine 1HFY2025 Results · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  We often see the headlines, don't we? A company announces something big,
• 0:11
  maybe a win, maybe a loss.
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  But to really get what's happening, you need to dig a bit deeper.
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  And that's exactly what we're doing today with Marco Polo Marine Ltd.
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  We've got their latest report right here.
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  Yep. The numbers for the first six months of their financial year 2025.
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  So that's ending March 31st this year. Exactly.
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  And our mission really is just to understand the story behind these numbers. Was it good?
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  Bad? Somewhere in between. That's the plan. We're using their official unaudited
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  financial statements, so it's straight from the source.
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  We want to unpack the performance and, you know, figure out what it signals for the future.
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  Okay, let's dive in. Top line first revenue. What are we saying?
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  All right. So for this first half of FY 2025, revenue came in at S52.7 million
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  dollars. Okay, $52.7 million. And how does that stack up against last year?
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  Well, compared to the same period in FY 2024, that's actually down.
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  Last year, they were at $61.6 million.
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  So that's a drop of, what, about 14 percent? Yeah, roughly 14 percent decrease
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  in revenue. That's the immediate takeaway.
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  Hmm, okay, a 14 percent drop. But wait, let's look further down.
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  What about the actual profit, the bottom line for owners? Right.
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  And this is where it gets interesting.
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  The net profit attributable to owners, it only saw a really slight decrease, just 4%. Only 4%. Yeah.
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  It went from $11.6 million last year down to $10.6 million this time around. Okay, hold on.
• 1:34
  Revenue down 14%, but profit only down 4%. That doesn't quite add up immediately. How did that work?
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  It's a great question. And the key really lies in their profitability,
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  specifically the gross profit margin.
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  Okay. So their actual gross profit amount did decrease slightly,
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  about 3%, down to $21.6 million.
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  But, and this is the important part, their gross profit margin improved quite nicely.
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  Improved. By how much? It went from 36% last year up to 41% in this period.
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  Wow, 36% to 41%. So they're keeping more of every dollar they earn before other expenses. Exactly.
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  Even though the total pie shrunk a bit, the slice they kept from their core
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  operations got bigger, relatively speaking.
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  So what drove that margin improvement then? How did they manage that?
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  Well, according to the report, the main factor was doing less rechartering of
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  third-party vessels. Rechartering. Explain that a bit. Sure.
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  Sometimes, maybe for a specific job or if their own ships are busy,
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  they'll essentially rent a vessel from another company and then charter it out
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  to their own client. Okay. Like a middleman.
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  Kind of. But that type of business usually comes with lower profit margins compared
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  to using their own ships.
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  I see. So they did less of that lower margin work this time. Precisely.
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  Less volume of that less profitable activity meant the average profitability
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  of their revenue went up. That's clever.
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  A strategic pullback, maybe? Focusing on quality over just quantity of revenue?
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  It certainly looks that way.
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  So let's break down where that revenue actually came from. They have two main segments, right?
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  Yeah, ship chartering and shipbuilding and repair. How did they perform individually?
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  Okay, so for ship chartering, the revenue decrease was smaller,
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  just about 3%. It came in at $32.0 million.
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  Still down, but not as much as the overall number. Right. And the report says
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  this was mainly because of that reduction in rechartering we just talked about,
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  specifically in Taiwan.
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  But there was a positive offset. They actually saw better utilization of their
• 3:28
  own fleet. Their ships were busier.
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  So their owned assets worked harder, which helped soften the blow from less rechartering.
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  Got it. What about the other side?
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  Shipbuilding and repair. Yeah, that's where the bigger hit came.
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  Revenue there dropped significantly. How much? By 28 percent, down to $20.7 million.
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  Ouch, 28 percent. Why such a big drop there.
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  The main reason given is simply fewer third-party shipbuilding projects being
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  worked on during these six months compared to the same time last year.
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  Okay, so a slowdown in those big construction contracts really pulled down the
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  overall revenue figure. That makes sense now.
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  Let's move on to the costs of running the business. Other income and expenses.
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  Sure. Looking at other operating income first, that decreased by 11% to S2.2
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  million dollars. Why was that down?
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  Mostly lower gains from selling off some assets, a bit less interest income,
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  and also less money from selling scrap.
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  But interestingly, they did have higher foreign exchange gains, which helped a little.
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  Okay, a mixed bag on the income side. What about the actual costs?
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  Administrative expenses? Admin costs went up by 10%, hitting $9.0 million.
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  And the driver there? Primarily higher staff costs. The report mentions both
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  increased headcount, so more people, and higher wages. Hmm.
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  Investing in people. Seems like it. And there was also a new item this period,
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  about $0.3 million recognized for employee share option expenses.
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  That wasn't there last year.
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  OK, so higher people costs in this new share option charge.
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  Yeah. What about other operating costs beyond admin?
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  Those saw a bigger jump, actually, up 27 percent to some point $2 million.
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  Wow, 27 percent. What's behind that? Mainly higher legal fees,
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  increased depreciation costs as assets aid or new ones come online,
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  and also more spending on marketing.
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  So generally, operating costs seem to be on the rise across the board.
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  Now, a big one for companies making investments, finance costs, cost of borrowing.
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  Yeah, that one really stands out. Finance costs increased by...
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  Wait for it. 561 percent. 561 percent. Whoa. Yeah. Up to 708 million dollars.
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  It sounds dramatic and it is a big percentage jump, but the reason is quite specific. Which is?
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  It's mainly because they drew down loans for that new big vessel,
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  the construction service operation vessel, the CSOV. Ah, the new build. Right.
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  And also for funding the construction of their fourth dry dock down in Batam.
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  OK, so that massive increase is directly tied to financing these major strategic
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  growth projects. It's the cost of expansion.
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  Exactly. It's borrowing money now to hopefully make more money later with those
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  new assets. Makes sense. What about taxes? Did the tax bill go up or down?
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  Income tax expense actually went down quite a bit by 36 percent to $2.8 million.
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  And the reason for that, lower profits. Pretty much. The report says it's mainly
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  due to reduction in their taxable profits for the period, which,
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  you know, aligns with the overall profit decrease we saw earlier.
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  Less profit, generally less tax.
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  Right. Now, the report mentions EBITDA, too.
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  Earnings before interest, taxes, depreciation, and amortization.
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  Kind of a measure of core operational cash flow. How did that look?
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  If you exclude things like foreign exchange movements and any unusual one-off
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  items, their EBITDA decreased by 18%, landing at $15.4 million.
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  Okay. Down 18%. So even looking at it that way, core profitability took a bit
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  of a dip in this half. Correct.
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  It gives another angle on the operational performance, stripping out some of
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  the financing and accounting variables.
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  So summing up the income statement side, lower revenue, yes, but improved margins.
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  Higher operating costs, partly due to investments.
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  Significantly higher finance costs because of investments, leading to a lower
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  profit overall for the half. That's a good summary.
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  Now, should we pivot to their financial position, the balance sheet snapshot
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  as of March 31st? 31st. Yeah, let's do that.
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  What are their assets and liabilities looking like compared to,
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  say, the end of their last financial year, September 2024?
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  Okay, starting with non-current assets, the long-term stuff.
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  Those increased quite a bit by S-35.4 million dollars, reaching S-198.2 million dollars.
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  And that's mainly the new investments again. You got it.
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  Primarily additions to property, plant, and equipment.
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  Think that CSOV under construction, the new dry dock development,
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  it reflects that spending.
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  Okay, building up the long-term base. What about current assets,
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  the shorter-term stuff? A few moves there.
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  Inventories, probably materials for shipbuilding, decreased by S1.4 million dollars.
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  That might tie into having fewer shipbuilding projects active. Makes sense.
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  And contract assets, that's money earned but not yet billed,
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  also decreased by S1.7 million dollars.
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  Right. Now, what about money owed to them versus money they owe?
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  Receivables and payables. Okay. Trade receivables, what customers owe them,
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  actually went up by $5.0 million to S25.5 million dollars. Why the increase there?
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  The report mentions better recent business performance, which is good,
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  but also maybe some slower payments coming in from customer.
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  Hmm. Okay. And on the other side, what they owe suppliers? Trade payables.
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  Those increase slightly by S1.6 million dollars to S17.0 million dollars.
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  Possibly linked to higher purchasing activity in the ship chartering part of
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  the business. Any other big shifts on the liability side? Yes, actually.
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  Other payables and accruals jumped significantly, up by $8.3 million to $19.9
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  million. Oh, what's in there?
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  It's mainly accrued costs for shipbuilding and repair projects,
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  so costs incurred but not yet paid out, and also a deposit they received because
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  they're selling their stake in a joint venture.
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  Ah, okay. What about loans?
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  We saw finance costs go way up because of new borrowing, but what happened to the total loan balance?
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  Interestingly, their total interest-bearing loans actually decreased slightly,
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  down by $4.7 million to S28.3 million dollars. How?
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  If they burrowed for the CSOV and DryDoc? Because they also made principal repayments
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  on existing loans during the period. So the repayments outweighed the new drawdowns
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  for the Betom DryDoc mentioned in this section.
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  Okay, so managing their debt levels even while investing. That's interesting.
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  What about cash with all this investment spending?
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  Yeah, cash is down. Cash and cash equivalents decreased from S-68.8 million
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  dollars to S-45.6 million dollars.
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  That's a pretty big drop, but expected given the investments? Expected, yes.
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  When you're spending heavily on new ships and facilities, the cash balance will
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  naturally take a hit, at least in the short term.
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  And working capital, the short-term
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  buffer. That also decreased from $54.7 million down to $29.5 million.
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  Reflects the changes in current assets and liabilities we discussed.
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  But what about their overall debt risk?
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  Gearing. Still looking very strong there. Net gearing remained at nil. Nil.
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  So essentially, their cash covers their debt. Basically, yes.
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  It indicates a very low level financial risk from debt. And another positive
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  sign, their net asset value per share actually increased slightly.
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  Oh, from what to what? From 5.4 cents per share last September to 5.6 cents
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  per share at the end of March.
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  So even with less cash and lower short-term profit, the underlying value attributed
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  to each share went up, suggests the market, or at least the accounting,
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  sees value in those investments.
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  That's one way to interpret it, yeah. The assets being built are adding value
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  to the balance sheet. Okay, let's quickly touch on cash flow for the six months.
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  Where did the money actually move?
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  All right, so net cash generated from their day-to-day operating activities
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  was positive, $17.0 million.
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  They noted better working capital management helped here. So operations are
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  bringing in cash. Good. Where did it go?
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  Well, a big chunk went into investing activities. They used S-32.8 million dollars,
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  mostly for buying property, plant and equipment.
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  Again, the CSOV, the dry dock. Right. The big strategic place. Exactly.
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  And then in financing activities, they used another S-11.8 million dollars.
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  This was mainly for repaying loans, as we discussed, and also paying out dividends.
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  Okay. So operations generate cash, but significantly more cash flows out for
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  investments in financing activities like loan repayment and dividends.
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  That explains the drop in the overall cash balance.
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  Precisely. It paints a clear picture of investment for future growth.
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  Now let's talk about that future. What's the company's outlook?
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  How do they see the market in their place in it?
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  They give a, I'd say, cautiously optimistic view. For the traditional offshore
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  oil and gas industry, they project a stable outlook, despite,
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  you know, all the global economic challenges floating around. Stable. Okay.
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  What about renewables? That's a big focus for them, isn't it? Huge.
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  They expect the offshore wind sector to keep growing, driven by the big push
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  for energy transition globally and countries wanting more energy security.
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  And that means more demand for their vessels. That's the idea.
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  Especially the specialized vessels needed for wind farm construction and maintenance,
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  like their new CSOV and the CTVs.
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  But are there any clouds on the horizon? Risks?
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  They do mention one specific uncertainty. Potential U.S.
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  Tariffs on components and materials used in both oil and gas and renewables.
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  That could push up costs.
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  Yeah, trade issues are always a factor.
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  Okay, what about their specific business segments?
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  Chartering outlook. For ship chartering, they see the market for offshore support
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  vessels, OSVs, remaining stable, helped by demand from both oil and gas and
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  offshore wind. And the new vessels.
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  They're definitely pinning hopes on those. The new CSOV and the three crew transfer
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  vessels, the CTVs, starting work in Taiwan from the third quarter of this year.
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  They expect those to start boosting revenue soon. But the full impact might take longer.
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  Yeah, they suggest the more significant contribution will likely be seen in
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  the next financial year, FY2026.
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  However, they also expect that trend of less demand for rechartering third-party
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  vessels in Taiwan to continue.
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  So the strategy seems clear.
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  Rely more on their own new specialized fleet, particularly for wind.
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  That's definitely the direction it's pointing. And the shipyard division.
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  With the new dry dock. They say utilization of their existing dry docks in Batam is healthy.
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  And the fourth one, which was completed just recently in May 2025,
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  is expected to help grow their ship repair revenues starting from the second half of this year.
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  Again, with a full impact later. Full year impact in FY2026, yeah.
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  But on the flip side, they expect shipbuilding activity to moderate,
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  to slow down as the current projects get delivered in the second half of this
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  year. So maybe a shift in the shipyard's focus.
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  More towards repair and maintenance, less on new builds, at least for a while. Could be.
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  It aligns with the revenue drop we saw in that segment this period, too.
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  Their overall stated goal is revenue growth. But while managing these risks
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  is what they call an evolving energy landscape. Makes sense.
• 14:08
  Just quickly, any mention of share capital changes, share options.
• 14:12
  Yeah, they touched on that. They have employee share option schemes.
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  The older 2015 scheme, all options under that are now expired.
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  But the newer 2024 scheme still has about 43 million options outstanding. Same as the last report.
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  Okay. And finally, dividends. Any news for shareholders for this half year?
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  No dividend declared for this six-month period ending March 31st.
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  They basically said any decision on dividends will be made at the end of the
• 14:39
  full financial year. Right. Standard practice for many companies.
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  Okay, let's try and wrap this up, this deep dive into Marco Pilmarine's first half.
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  It's definitely shown a mixed picture. wouldn't you say? Absolutely.
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  You've got that headline revenue drop, yes.
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  But then you dig a bit and you see the improved profit margins.
• 14:56
  That's key. Right. And then the increased expenses, both operational ones like
• 15:00
  staffing and those big finance costs.
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  But those are tied directly to these strategic investments in the new vessel
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  and the dry dock expansion.
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  Exactly. So while the profit for this specific six-month period is down,
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  the underlying moves seem focused on positioning for future growth,
• 15:17
  particularly in that offshore wind space. And the outlook reflects that, doesn't it?
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  Cautious, acknowledging risks like tariffs.
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  But generally optimistic about leveraging these new assets in both traditional
• 15:28
  energy and, maybe more importantly, the growing renewables market.
• 15:32
  Yeah, it really underscores why you can't just look at one number, like revenue.
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  You need to see the interplay between revenue, margins, costs,
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  investments, and the strategy behind it all.
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  That margin improvement, despite lower sales, is a really telling detail. It is.
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  So thinking longer term now, considering these big investments they've made,
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  the CSOV, the dry docks, and looking at this shifting energy world,
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  what are the big questions for you?
• 15:56
  What are the potential drivers and maybe the biggest risks for Marco Polam Ring going forward?
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  Well, the big driver has to be successfully deploying these new specialized assets, right?
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  Especially capturing that expected growth in offshore wind. If they can get
• 16:10
  good contracts, high utilization for the CSOV and CTVs, that could really boost performance.
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  The expanded repair capacity also offers growth. And the risks.
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  Execution risk is always there with big projects, ensuring the vessels perform, managing costs.
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  Market risk, too, will the offshore wind market grow as quickly as predicted?
• 16:29
  Will oil and gas demand remain stable enough? And those tariff issues could bite.
• 16:33
  Plus, competition is always a factor. It really makes you think about that balancing act, doesn't it?
• 16:38
  How do you serve the ongoing needs of oil and gas while pivoting hard towards
• 16:42
  the demands of renewables. It's a fascinating challenge.
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  How well positioned are they really to capture growth from both sides?
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  That's definitely something for you, the listener, to mull over after this debate.
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  Music.