KNM ... Mar11

KNM Group Bhd expects the company's debt levels to fall further as unit Borsig GmbH is doing better now.

The company's plans to use Berlin-based Borsig, which was acquired in early 2008 for RM1.7bil, to expand business was somewhat derailed following the global economic recession, which saw oil prices drop as low as US$33 a barrel from over US$147.

Since then many have been concerned about KNM's ability to pare down debt.

KNM Group was not concerned about its debt level, which had dropped significantly to about RM1 billion currently from the RM1.7 billion to RM1.8 billion level following the acquisition of Borsig in mid-2008.

The high debt was largely due to its investment in Borsig.

On the group’s outlook, it would continue to move up the value chain by looking at opportunities through acquisitions and joint ventures, noting that the group had a healthy cash position of about RM296 million.

In December 2010, KNM Group’s wholly owned subsidiary KNM Process Systems Sdn Bhd secured a £450 million (RM2.2 billion) engineering, procurement, construction and commissioning (EPCC) contract for a biomass and waste recycling centre project in England.
The company's orderbook now stood at RM4.5bil versus the pre-Borsig acquisition high of RM3.5bil, and a net cash in hand of RM296mil.

It declined to comment on whether there were any renewed plans to take the company private after a deal by Mettiz Capital and GS Capital Partners VI Fund LP, a Goldman Sachs unit, at 90 sen a share fell through.

The tax incentive the company has been enjoying for the past two years would continue to play a big role in the future. The company's fourth quarter earnings were lifted by a tax incentive (which was supposed to enable the company to price its products more competitively and make gross margins that were one to three percentage points lower) of RM14mil.

KNM's current orderbook “should keep the company busy for the next two years”. The company's tender book on the other hand, stood at more than RM16bil.

KNM Group Bhd, which has seen its earnings on a decline, expects better earnings this year underpinned by its all-time high order book of RM4.5 billion.

About 95% of KNM Group’s projects came from the overseas market and that the group was still “more foreign driven” in terms of income. Germany is the group’s largest overseas operation and it contributes about 50% of the group’s total revenue.

Its Malaysian operations contributed about 30% of the group’s revenue, and it was looking to improve its business with the growing domestic opportunities in the oil and gas industry.

For FY10 ended Dec 31, KNM Group’s net profit dipped 49.6% to RM131.2 million from RM260.55 million the previous year, while revenue shrank to RM1.55 billion from RM1.83 billion due to lower job orders, lower contribution margins and higher operating costs.

Basic earnings per share contracted to 13.34 sen from 26.29 sen previously, while net assets per share stood at RM1.73 as at Dec 31.