Greetings, fellow investors and market watchers! We’re diving into the latest financial performance of COASTAL CONTRACTS BHD. for the first quarter ended 31 March 2025. This report offers a fascinating glimpse into the company’s journey, revealing not just its financial standing but also its strategic pivots in a dynamic global landscape.
While the quarter under review saw a dip in profitability compared to previous periods, largely due to the absence of significant one-off gains, it’s also a period that underscores Coastal Contracts’ robust financial health and its deliberate strategic shift towards the burgeoning renewable energy sector. Notably, the company recently declared a special interim single-tier dividend of 5.0 sen per ordinary share for the financial year ended 31 December 2024, which was paid out on 15 April 2025, a testament to its commitment to shareholder returns.
Let’s unpack the numbers and understand the story they tell.
Core Financial Highlights: A Quarter of Transition
The first quarter of 2025 presents a mixed bag, with revenue and profit figures reflecting a recalibration after periods boosted by non-recurring events. It’s crucial to look beyond the headline numbers and understand the underlying operational dynamics.
Revenue Performance
Coastal Contracts’ revenue for the current quarter stood at RM16.536 million, a decrease of 7% compared to the RM17.803 million recorded in the corresponding period last year. On a quarter-on-quarter basis, revenue saw a more significant decline of 58% from RM39.6 million in the previous quarter, primarily due to the completion of several repair contracts in the Shipbuilding and Shiprepair division in the prior quarter.
Q1 2025
Revenue: RM16,536K
Q1 2024
Revenue: RM17,803K
Profit Before Tax (PBT)
Profit before tax for the first quarter of 2025 was RM16.506 million, a substantial decrease of 84% from RM98.797 million in the first quarter of 2024. This notable decline is primarily attributed to the absence of significant one-off gains that bolstered profits in previous periods, such as gains on disposal of offshore support vessels (OSVs), higher interest income from a joint venture, and large foreign exchange gains. The previous quarter (Q4 2024) also saw a significant debt waiver and impairment reversals that are not present in this quarter.
Q1 2025
Profit Before Tax: RM16,506K
Q1 2024
Profit Before Tax: RM98,797K
Profit for the Period
Following the trend in PBT, the profit for the period also saw a significant reduction to RM15.891 million in Q1 2025, down from RM96.501 million in Q1 2024. The profit attributable to owners of the Company was RM13.473 million, compared to RM94.860 million in the same period last year.
Q1 2025
Profit for the Period: RM15,891K
Q1 2024
Profit for the Period: RM96,501K
Earnings Per Share (EPS)
Basic earnings per share for the quarter stood at 2.51 sen, a notable decrease from 17.77 sen in the corresponding period last year, reflecting the lower net profit attributable to shareholders.
Q1 2025
Basic EPS: 2.51 sen
Q1 2024
Basic EPS: 17.77 sen
Segmental Performance Deep Dive
Understanding the performance of each business unit provides a clearer picture of Coastal Contracts’ operational landscape.
Gas Processing Division
This division did not generate any revenue in Q1 2025, consistent with previous quarters, as there has been no charter income from the JUGCSU since December 2023. However, it reported a profit before tax of RM9.502 million in Q1 2025, a significant improvement from a loss before tax of RM72.9 million in the previous quarter. The prior quarter’s loss was primarily due to a substantial impairment loss on amounts owing by the JUGCSU charterers, which was partially offset by a foreign exchange gain.
Vessel Chartering Division
The Vessel Chartering division generated relatively stable revenue of RM16.070 million in Q1 2025, compared to RM16.4 million in the previous quarter. However, revenue declined by 7% year-on-year from RM17.4 million in Q1 2024, mainly due to the absence of charter income from an offshore support vessel. The division recorded a lower profit before tax of RM8.187 million in Q1 2025, compared to RM35.6 million in the previous quarter and RM32.0 million in Q1 2024. The higher profits in those periods were mainly attributed to gains on disposal of OSVs, which were not present in the current quarter.
Shipbuilding and Shiprepair Division
This division generated a modest revenue of RM0.466 million in Q1 2025. This is significantly lower than the RM23.2 million recorded in the previous quarter (Q4 2024), which was boosted by the completion of several repair contracts. Compared to Q1 2024, revenue was similar at RM0.4 million. The division reported a loss before tax of RM0.903 million in Q1 2025, an improvement from a loss of RM1.3 million in Q1 2024. It contrasts sharply with the significant profit before tax of RM153.7 million in Q4 2024, which was primarily due to the recognition of a RM147.6 million debt waiver.
Financial Health and Cash Flow
Coastal Contracts maintains a robust financial position despite the quarterly profit fluctuations.
Balance Sheet Strength
As at 31 March 2025, total assets increased slightly to RM1,887.334 million from RM1,880.406 million at 31 December 2024. Total equity also saw a slight increase to RM1,816.199 million from RM1,801.430 million. Importantly, total liabilities decreased to RM71.135 million from RM78.976 million, indicating a healthier financial structure.
The company’s debt-equity ratio has further improved to 0.015 from 0.017 last quarter, largely due to the repayment of short-term borrowings. This low gearing level is well within management’s comfort zone, showcasing strong financial prudence.
Cash Flow Dynamics
The quarter saw a net decrease in cash and cash equivalents, primarily due to significant cash outflows from investing activities. Net cash flows used in operating activities increased to RM32.527 million (Q1 2025) from RM14.904 million (Q1 2024). Net cash flows used in investing activities amounted to a substantial RM116.478 million, mainly driven by the net purchase of investments. This outflow contrasts with a net inflow of RM70.086 million from investing activities in Q1 2024, which included proceeds from OSV disposals.
However, financing activities generated a positive net cash flow of RM3.091 million in Q1 2025, compared to a net outflow of RM7.792 million in Q1 2024, supported by proceeds from the issuance of ordinary shares.
Outlook and Strategic Direction
Looking ahead, Coastal Contracts is positioning itself strategically to navigate the evolving global economic and energy landscapes.
The global economic outlook remains cautiously optimistic, characterized by both resilience and uncertainty. While advanced economies may experience moderating growth due to tighter monetary policies, persistent inflation, and geopolitical tensions, emerging markets are expected to drive expansion. Sectors like renewable energy, artificial intelligence, and biotechnology are anticipated to fuel innovation and productivity gains.
The US Federal Reserve’s interest rate trend in early 2025 indicates a pause in its rate-cutting cycle, adopting a data-dependent approach due to concerns about persistent inflation and a strong labour market. This stance reflects a desire to balance the risks of premature easing and overly tight monetary policy.
In the energy market, the outlook is shaped by geopolitical dynamics, technological advancements, and the global push toward decarbonization. Renewable energy sources are expected to continue their rapid growth, driven by declining costs and supportive policies. However, traditional energy sources like oil and natural gas will remain critical in the short to medium term, especially with rising global energy demand and supply chain adaptations to geopolitical tensions.
Against this backdrop, Coastal Contracts is strategically poised to capitalize on the burgeoning renewable energy sector, both domestically and internationally. Leveraging its exceptionally strong cash reserves, the Group plans to aggressively pursue new opportunities in high-potential renewable energy projects. This expansion will run in parallel with the maintenance of its core oil and gas business, ensuring a balanced and diversified portfolio. Management’s proactive approach underscores a commitment to driving sustainable growth and establishing Coastal Contracts as a key player in the global energy transition.
Summary and
Coastal Contracts’ first quarter of 2025 was a period of consolidation, with profitability normalizing after a series of one-off gains in prior periods. While headline profit figures saw a decline, the underlying financial health remains robust, characterized by stable assets, reduced liabilities, and a very low debt-equity ratio. The company’s strategic pivot towards renewable energy, supported by strong cash reserves, signals a forward-looking approach to sustainable growth amidst evolving market dynamics.
Key risk points to consider for the company’s future performance include:
- Volatile crude oil prices and fluctuating global and regional economic conditions, which directly impact the demand for vessels, offshore assets, and ship repair/charter services.
- Ongoing geopolitical dynamics and their potential to cause volatility in energy prices and disrupt supply chains, which could affect both traditional and renewable energy segments.
- Challenges inherent in the energy transition, such as the need for significant investments in grid infrastructure, energy storage solutions, and managing the intermittency of renewable energy sources.
This quarter’s report from Coastal Contracts BHD. clearly illustrates a company in a transitional phase, moving from opportunistic gains to a more structured, long-term growth strategy centered on renewable energy while maintaining its foundational oil and gas operations. Their strong financial position, particularly their cash reserves and low debt, provides a solid foundation for this strategic pivot.
What are your thoughts on Coastal Contracts’ strategic pivot towards renewable energy? Do you believe their strong cash reserves will enable a swift and successful transition in the coming years?
Share your views in the comments below!
