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FRONTKEN CORPORATION BERHAD
(651020-T)
ANNUAL REPORT
2015
With a wavering global economy and unsettling commodity price
trends, like many others in the market, Frontken was not immune to
such market conditions. The dramatic decline in oil prices from an
oversupplied market has affected the entire chain of the oil and gas
industry. It is believed that the unfavourable market effects of 2015
will continue to ripple through to 2016.
In response to such adverse market conditions, the management of
Frontken took the necessary steps in restructuring and streamlining
its resources to ensure that it is maximizing operation capacities
and profits. For example in Singapore, having experienced a
slower performance for two years running, resources were heavily
streamlined and business strategies revised. During 2015 Frontken
Singapore pursued various discussions with foreign companies in
establishing a business base in Singapore tapping on its strategic
regional location and expertise it is able to offer its potential partners.
This has in turn developed a wider client base and international
brand recognition for the Group. We hope to turn some of these
possibilities into realities in the very near future.
Although it is true that for the foreseeable future we will likely continue
to see lower commodity price trends particularly in the oil and gas
industry, we are cautiously optimistic that we will be able to maintain
our market share in our maintenance and repair business sectors
albeit at a lower margin in line with our customers’ expectation. To
make up for the lower margin, we need to increase our efficiency
and explore cost savings measures.
BUILDING A SOLID FOUNDATION
Over the recent years Frontken has been strategising and building
a solid platform to maintain a stable momentum for both its
operational and financial growth. I believe that establishing a good
fiscal discipline and strong financial position is imperative to maintain
long term and sustainable growth. Since 2012, Frontken have been
steadily building a solid cash position for the Group with a zero net
gearing ratio and a cash and cash equivalent of RM105.1 million as
at 31 December 2015. Armed with a strong financial position gives
us leverage to capitalise on project and investment opportunities.
With this in mind, we will continue to look out for mergers and
acquisitions to boost our bottom line.
AN OVERVIEW
Despite the headwinds for FYE2015 Frontken
managed to deliver a profitable year with a revenue
of RM280.6 million and earnings before interest, tax
and amortization of RM35.6 million. Acknowledging
that our financial profits for FYE2015 was lower
compared to FYE2014; it is to be noted that this
was mainly due to an unfortunate cost overrun in
our ATB Project at Tanjung Bin that was completed
in July 2015. ATB Project was Frontken’s first
Engineering, Procurement, Construction and
Commissioning (“EPCC”) contract of this size. We
encountered some challenges during the execution
of the project and stretched ourselves in ensuring
on delivering the completed tankage facilities to
our client and at the same time ensuring that our
high standard of quality was not compromised. We
believe that undertaking this project has provided us
with an opportunity to further expand and advance
on our technical expertise and resources in EPCC
projects should we decide to pursue this area of our
business.
CHAIRMAN’S
STATEMENT
Dear Fellow Shareholders,
On behalf of the Board of Directors
of Frontken Corporation Berhad
(“Frontken” or the “Group”), I
am pleased to present to you
the Annual Report and Audited
Financial Statements of the Group
for the financial year ended 31
December 2015 (“FYE2015”).