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Rotary Engineering Posts Profit Of $4.2m For 1H12, Margins Strained By SATORP
Corporate Digest | 08 August 2012
By: Louis Kent Lee
Articles (199) Profile

In the first half ended 30 June 2012, Rotary Engineering (Rotary), a known name for the provision of engineering, procurement, construction and maintenance services to the oil and gas and petrochemical industries posted a profit figure of $4.2 million, a 73 percent dip compared to its 1H11 earnings. The slip in profits was mainly attributable to the pressure felt on its Saudi Aramco Total Refining & Petrochemical Company (SATORP) project, as unanticipated hiccups and cost overruns threw its baggage on overall margins.

Chia Kim Piow, chairman and managing director of Rotary revealed that albeit the challenges encountered in the SATORP project, the situation in SATORP is still on track for completion. Chia revealed that due to the scale of SATORP, certain aspects could have been undermined and underestimated, which resulted in the unprecedented cost overruns. He stressed that this kind of situation is very uncommon for Rotary as it has traditionally always been very prudent and had solid contingencies in place.

“The working conditions in Saudi Arabia is also very challenging, and from this, we have learnt something new about how we need to do things there, and I think that, is a valuable lesson,” added Chia.

Despite the slide in profits, Rotary’s financials remain healthy, revealing net assets of $274.9 million with a net cash position of $137.1 million as at 30 June 2012.

It also saw better collections from trade and other receivables from the SATORP project for 2Q12 and total loans and borrowings lessened to $92.8 million, a drop in 16 percent, upon repayment of the loans.

Rotary also revealed that it had secured contracts totalling $35 million in 2Q12, but could not go into specific details of the breakdown of transactions due to confidentiality and competitive reasons.

As Rotary progresses nearer to the finishing line for its SATORP project, it continues to see business opportunities in the middle-east and ASEAN. Barring unforeseen circumstances, Rotary believes it will remain profitable for FY12.

Louis is a qualified accountant with the ACCA, and is the Research Editor at Shares Investment magazine.

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