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- PVS announced its Q3 2023 results with revenue of VND4.2tn (USD171.1mn; +19% YoY) and NPAT-MI of VND141bn (USD5.8mn; -27% YoY). The divergence in growth rate of revenue and earnings is due to 1) negative gross profit margin (GPM) of the mechanical & construction (M&C) segment, 2) minimal GPM of the operations & maintenance (O&M) segment, 3) general & administrative expenses jumping 55% YoY (due to temporarily high labor costs allocated in Q3), and 4) financial expenses jumping 2.4x YoY.
- In Q3 2023, the M&C’s GPM was -0.6%, caused by high costs in finalizing its Sao Vang – Dai Nguyet project (the client signed final acceptance in Q3 2023 despite construction finishing in 2021). We observe a similar pattern in Q3 2022 with M&C’s GPM of -0.9% and 9M 2022 M&C gross profit only accounting for 17% of 2022 M&C gross profit. In 9M 2023, M&C’s gross profit increased 3x YoY and fulfilled 53% of our full-year forecast.
- We note that PVS recorded a net other loss of VND20bn in Q3 2023 from contract termination of FPSO Lam Son in which PVS has a 51% stake. This contract termination happened in June 2017; however, the amount of compensation to involved parties was finalized in Q3 2023. In 2014, PVS secured a ten-year contract to lease its FPSO Lam Son to Lam Son Joint Operating Company (JOC) (the operator of Thang Long – Dong Do oil field, a joint venture between Petronas of Malaysia and PetroVietnam Exploration & Production Corporation) from 2014 to 2024. However, this contract was suddenly terminated in June 2017 as Lam Son JOC dissolved. PVEP then became the operator of the Thang Long – Dong Do oil field. PVS was granted a new contract from July 1, 2017 to lease its FPSO Lam Son for this oil field. After finalizing compensation for the contract termination, PVS recorded a net compensation of -VND20bn in Q3 2023. We note that the current contract for FPSO Lam Son is set to last until end-2024, and PVS is negotiating a contract for later years. We are forecasting FPSO Lam Son to contribute a net profit of VND119bn p.a. to PVS in 2023-2024 and stop operations from 2025.
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