Marco Polo Marine Ltd has released its responses to queries from the Securities Investors Association (Singapore) concerning its financial year 2024 annual report, presenting both strategic opportunities and operational challenges that could influence shareholder value. Here are the key highlights:

Offshore Support Vessel (OSV) Market and Strategic Growth

The company reported a 9% increase in ship chartering revenue, reaching \$71.9 million. This growth was attributed primarily to higher charter rates, supported by robust demand from offshore wind farms and the oil and gas sectors. Marco Polo Marine emphasized its strategic pivot toward the offshore wind energy sector in Asia, targeting projects in countries such as China, Taiwan, Korea, Japan, Vietnam, and the Philippines.

The company also highlighted the competitive edge of its fleet, stating that its vessels, at approximately 10 years old, are still well-suited for current demand. Marco Polo Marine is positioning itself as an early participant in Asia’s burgeoning offshore wind sector, with its newly built Commissioning Service Operations Vessel (CSOV) designed to be future-ready. The CSOV features advanced green technology, including hybrid battery-based energy storage systems that reduce carbon emissions by up to 20%, and preparations for methanol fuel use to further lower its carbon footprint.

Update on Shipyard Utilisation and Expansion

Despite the reopening of Chinese shipyards, which initially reduced demand for ship repair services, Marco Polo Marine reported a strong recovery in this segment. Shipyard utilisation rates rose to 91% in FY2024, up from 84% in FY2023. The company justified its decision to expand capacity with the construction of Dry Dock 4, citing strong demand for its ship repair services.

Significant Increase in Wages Explained

Wages, salaries, and bonuses increased significantly from \$8.23 million in FY2023 to \$10.96 million in FY2024. The company attributed this to its expansion plans and performance-based bonuses tied to its strong FY2023 results, which saw a 48% increase in revenue and an 83% rise in adjusted profit after tax compared to FY2022. Despite a 3% decline in total revenue for FY2024, gross profit and adjusted net profit after tax rose by 6% and 4%, respectively.

One contributing factor to the revenue decline was the allocation of one dock exclusively to the construction of the CSOV. Since this is an internal project, no shipbuilding revenue was recognized, impacting overall revenue figures.

CSOV Project Delays and Financial Updates

The completion timeline for Marco Polo Marine’s 83-meter-long CSOV has been delayed from its initial Q1 2024 schedule to the first half of 2025, with the vessel now expected to be operational by February 2025. The delay was attributed to a shortage of skilled labor and compliance with unique passenger class requirements for reflagging to Taiwan. Despite these challenges, the CSOV remains within its initial budget of US\$60 million.

Marco Polo Marine noted that charter rates for CSOVs have been rising since December 2022, with consistently high utilization rates, suggesting a promising market outlook.

Financial Discrepancy and Strengthened Controls

The company addressed a material reclassification difference of \$6.5 million in its audited financial statements, citing an “arithmetic discrepancy” related to the overstatement of the Group’s non-controlling interest balance. To prevent future discrepancies, Marco Polo Marine plans to strengthen internal controls, provide regular staff training, automate processes, and enhance its collaboration with external auditors.