What’s next for Ezra after its sharp profit crash?

It needs to refinance a whole lot of debt.

The next few quarters may prove to be choppy for struggling Ezra. Following a sharp profit drop in the first quarter, analysts note that Ezra will have to cope with dwindling orders and $225m worth of notes expiring in September 2015.

DBS analyst Suvro Sarkar noted that while subsea division earnings performance should improve over the next two quarters, new order wins in subsea division are likely to remain subdued
amidst low oil price environment while the OSV division could see further headwinds as fleet utilisation and rates decline.

“Ezra also needs to figure out the best way to refinance S$225m worth of notes expiring in September 2015. Higher financing charges look likely going forward, given the stretched balance sheet,” Sarkar warned.
CIMB analyst Lim Siew Khee also noted that there has been too much hope on the Lewek Constellation, which failed to deliver as promised.

"There has been a slight delay in the commencement date from March to end-April. As this is Lewek Constellation’s first large-scale project, we see risk of further delays and margin compression. ROE could be dampened by any delays. Management also needs to aggressively bring in new orders to ensure utilisation visibility for Lewek Constellation, which is now only booked up to mid-2016," Lim wrote.

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