MAS Flies Back Into The Black

RM37m NET PROFIT IN Q3: Airline also announces RM3.1b cash call, RM8b capital reduction exercise

Malaysia Airline System Bhd (MAS), the country’s national carrier, says it plans to undertake a RM3.1 billion cash call, plus a RM8 billion capital reduction exercise to help clean the company's balance sheet and wipe off its accumulated losses.

The corporate exercise was announced on the same day MAS said it managed to return to the black after suffering six consecutive quarters of losses.

The company posted a small operating profit of RM4 million in the third quarter against a loss of RM191.8 million in the same quarter last year.

It recorded a net profit of RM37 million in the quarter under review versus a net loss of RM477.5 million in the same period in 2011.

However, revenue for the period under review fell two per cent to RM3.5 billion compared to the same period last year.

MAS group chief executive Ahmad Jauhari Yahya said the improvement in performance quarter-on-quarter at the operating level was mainly due to the route rationalisation programme (RRP) which saw a seven per cent reduction in available seat per kilometre (ASK).

This has resulted in a nine per cent drop in fuel costs and a seven per cent decrease in non-fuel costs in line with the carrier's capacity cuts, he said in a statement.

Fuel cost, which accounted for 38 per cent of group expenditure, fell to RM1.3 billion for the quarter following a nine per cent drop in consumption.

The same quarter also saw a drop in jet fuel price from US$137 (RM411) per barrel in the third quarter of 2011 to an average of US$131 (RM393) per barrel in 2012.

MAS carried 3.30 million passengers in the quarter compared with 3.35 million in the same quarter last year.

Meanwhile, the capital restructuring will be undertaken together with the RM3.1 billion renounceable rights issue, MAS said in a statement.

The national carrier will reduce both the par value of each existing ordinary share and share premium account.

It involves a reduction of 90 sen for each existing ordinary MAS share of RM1 each.

“The reduction in share premium account will give rise to a credit reserve of just above RM8 billion which will be utilised to reduce the accumulated losses of MAS,” it noted.

Based on audited accounts as at December 31 2011 and unaudited accounts as at September 30 2012, MAS’ accumulated losses stood at RM7.86 billion and RM8.19 billion, respectively.

MAS will undertake the rights issue once the capital restructuring is completed.

“The basis of entitlement and the issue price have not been fixed at this juncture to provide flexibility to the board in respect of the pricing and the number of rights shares to be issued,” it said.

Major shareholder Khazanah Nasional Bhd has given MAS its irrevocable and unconditional undertaking to subscribe for its full entitlement under the proposed rights issue.

Proceeds from the proposed rights issue are to finance capital expenditure and working capital requirements and to reduce borrowings, MAS added.

“As part of our ongoing efforts to rebuild MAS, the proposed restructuring reduces accumulated losses to better reflect the company’s fundamentals and to facilitate our objective of attaining a stronger financial position moving forward.

“The proposed rights issue, which is the fourth pillar in the long-term financing plan we announced earlier this year, will provide MAS with improved liquidity and financial flexibility, crucial in allowing us to execute our financing plans in the near term,”Ahmad Jauhari said.

- BTimes