Key to surviving was a strong cash flow generation.
As offshore firms reported the change in core earnings before interest, tax, depreciation, and amortisation (EBITDA) margin and net gearing, the clear survivors from the downturn are steadily emerging.
According to UOB KayHian, three offshore firms remained strong as the beleaguered sector continues to battle headwinds.
First on the list is Dyna-mac Holdings, whose core EBITDA margin remains strong at 14.5%. However, its low order book is a concern. UOB said it could be a possible M&A candidate given the small number of major shareholders and clean balance sheet.
The second survivor is the Mermaid Maritime, which saw core EBITDA margin improve the most amongst peers.
"At a robust 16%, and healthy net cash position, Mermaid is well-positioned to capture the likely recovery in subsea and pipelay activity in 2017. We think it unlikely that Mermaid will be privatised," noted UOB.
Last on the list is the Nordic Group, whose diversification strategy into plant maintenance has led to a growth in both core EBIT and EBITDA margin by a healthy 3-4ppt in a downturn.
"Balance sheet remains strong in a net cash position. With 2017 being another turnaround year for refineries, Nordic is expected to see improved earnings from its maintenance business in 2017," said the brokerage firm.
Wrapping it up, UOB noted that surviving the sector's downturn requires strong cash flow generation and continued de-leveraging.
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