TAS signs 12 shipbuilding contracts worth RM86.66m

KUCHING: TAS Offshore Bhd has signed 12 shipbuilding contracts worth a total of RM86.66 million with clients from Indonesia and Singapore in the 12 months to May 31, 2024 (FY2024), according to its chairman Datuk Mohammed Sepuan Anu.

Eighty-five per cent of the new contracts were from Indonesia where the group has a strong base. 

He said the robust sales of tugboats to shipowners in the Indonesia and Singapore had enabled TAS group to achieve remarkable revenue for the year under review to RM72.39 million, doubling that of RM36.13 million recorded in FY2023.

Group’s pre-tax profit, however, fell to RM9.66 million from RM15.28 million registered in FY2023, he added in the company’s newly released 2024 annual report.

The Sibu-based shipbuilder’s remaining shipbuilding contracts in hand amounted to RM210 million, which are expected to contribute positively to its bottomline in FY2025 and FY2026.  

“The positive outlook of the mining industry in Indonesia is expected to spur demand for more tugboats, essential for transporting mining products, especially coal and nickel. Our group is well-positioned to benefit from the rising demand for vessels,” said Mohammed Sepuan.

He said Indonesia’s mining sector continues to show promising potential, and according to International Energy Agency (IEA), revenues from nickel, copper and tin production in Indonesia could reach US$40 billion by 2050.

“Coal remains a cornerstone of the industry, with the (Indonesian) Ministry of Energy and Mineral Resources increasing the 2024 coal production quota by nearly 30% to 922.14 million tonnes. The targets for 2025 and 2026 are set at 917.16 million tonnes and 902.97 million tonnes respectively. Domestic coal demand is expected to rise, driven by electricity needs and the nickel industry.

“Additionally, demand from China and other regional importers support the surge in production. Competitive prices and geographical proximity are projected to sustain Indonesia’s coal exports even as prices decline.

“China and India, the world’s largest coal importers, continue to rely heavily on coal due to slow growth in renewables and gas based generation, with net zero emission targets set for 2060 and 2070 respectively,” added Mohammed Sepuan.

He said Indonesia’s dominance in the global nickel market is set to increase, thanks to its vast reserves and low production costs.

Benchmark Mineral Intelligence forecasts that Indonesia’s nickel production will continue to grow, reaching four million tonnes by 2030.

TAS said Indonesia’s nickel production, which heavily relies on coal for captive power generation, continues to drive coal demand. According to IEA, Indonesia’s coal-fired electricity generation is expected to increase by about five per cent from 2024 to 2026, maintaining a steady share in the electricity generation mix.

The country’s domestic coal demand is projected to reach 284 million tonnes by 2026, up from less than 200 million tonnes in 2024.

“The transportation and logistics sector in Indonesia are experiencing significant growth, driven by the expansion of the mining and agricultural industries.

“Indonesia, a leading coal exporter, primarily uses barges and tugboats for domestic and international transportation.

“Barge transportation is cost-effective and preferred for bulk commodities like coal and palm oil. This method is efficient, reducing the number of trips needed and consequently lowering fuel consumption and carbon emissions, making it an environmentally friendly option,” added the company

According to TAS, the global tugboat market is expected to grow from US$23.81 billion in 2024 to US$74.29 billion by 2032, with a compound annual growth rate of 15.3%. This growth is driven by economic expansion, increasing consumer demand and the expansion of international supply chain.

“The surge in maritime activities in the fast growing economies of the Asia Pacific region further boosts the demand for tugboats. Our group is well-positioned to benefit from the positive outlook of the tugboat market, supported by a strong client base in Indonesia,” added the company.

TAS said the increase in its inventories by 66.1 per cent to RM94.84 million during FY2024 was due to higher number of vessels under construction.

In response to the group’s growing order book, TAS said it had recently entered into two sale and purchase agreements to acquire three parcels of land adjacent to its existing shipyard in Sibu and another parcel of land in Tanjung Manis.

The land to be acquired for RM12 million is to facilitate the expansion of the group’s shipyard.

“This expansion aims to increase our operating capacity. For working capital requirements, our group relies on internally generated funds and short-term bank borrowings. For substantial capital injections required by our business plan, we may consider sourcing funds from the equity market and exploring synergistic and reliable joint-venture partnerships,” said TAS.