MARC has placed the rating of Malaysian Merchant Marine Berhad’s (MMM) RM120 million BaIDS on MARCWatch Negative. The rating action was taken following MMM’s announcement of poorer than expected financial results for the financial year ended 31 August 2006 (FY2006) and the commencement of MARC’s rating review on the company.

MMM is principally involved in the provision of shipping services, ship management and ship chartering services with a fleet of ten (10) vessels serving the tanker segment, dry bulk carriage segment as well as vehicle carriage segment. For FY2006, the Group recorded a loss before tax of RM146.8 million (FY2005: RM5.7 million profit) on the back of RM97.7 million revenue (FY2005: 127.0 million).

The loss suffered in FY2006 was largely attributed by a sizeable impairment charge and dry-docking expenditure written off, totalling RM98.6 million following the changes in the regulatory environment, including prohibition of carriage of hazardous and moderately hazardous chemical cargoes via single hull tanker (MARPOL 73/78). This had adversely impacted potential earnings of four (4) out of ten (10) MMM’s vessels. Other negative factors include obsolescence of MMM’s vessels equipment as well as escalation of dry-docking expenditure due to the ageing factor which resulted in MMM to write off those expenditure.

MMM’s MARCWatch placement mainly reflects the negative financial impact vis-à-vis MMM’s ageing fleet, as well as potentially reduced financial flexibility on the part of MMM to finance its fleet refurbishment/expansion initiatives. MARC expects to complete MMM’s BaIDS annual review soon and will disseminate any rating implications in due course.