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Strategy shifts power Dyna-Mac’s growth
IT WAS a turbulent time when Lim Ah Cheng took the helm at offshore oil and gas (O&G) contractor Dyna-Mac in 2020.
The company’s founder had passed away just months ago in 2019, and its financial results were dismal.
Underutilisation of the shipyard and a low order book drove Dyna-Mac to a net loss of S$23.8 million for FY2019, reversing from a net profit of S$1.5 million the year prior, as full-year revenue retreated 15.2 per cent to S$97.8 million.
Heading into the storm of a pandemic, Lim knew he needed to chart a new course for the engineering company. The keys to this, he felt, were a shift in strategy and changes to the company’s culture.
Specialising in building modules for the O&G industry, the company was reliant on tendering for contracts to build its order book. This was unsustainable, Lim said, as Dyna-Mac was serving the backend of the oil and gas value chain, where the oil or gas is being pumped out.
“A lot of money is already sunk into the field, and vessels have to be built. And if you are still tendering, you are out of the game because you are just filling up the numbers,” said the CEO.
Rather than continuing to tender widely, Lim and his team switched gears to engaging customers.
These talks happened without an expectation of a contract, he said. Instead, Dyna-Mac looked to build relationships and add value through solving the customer’s problems.
For example, Dyna-Mac provided customers with advice on lowering construction costs, and worked with them to change the method and design of their modules.
He recounted that a customer that Dyna-Mac kept engaging with – despite not having any contracts with them – eventually signed a few new projects with the company.
“When you start working with them in a humble way rather than waiting for a tender – you should create value, talk to them about the problems they have, and solve it – they will remember you,” said Lim.
Dyna-Mac’s losses deepened to S$58.4 million for FY2020, but sticking to this new strategy has paid off.
For FY2021, the company reversed out of the red with earnings of S$5.5 million, before more than doubling to S$13.1 million for FY2022.
For the first half of FY2023 ended June, Dyna-Mac posted a 46.9 per cent increase in revenue to S$182.3 million, from S$124 million in H1 FY2022.
H1 FY2023 earnings trebled to S$10.1 million, from S$3.1 million in the corresponding year-ago period.
Lim attributed the turnaround to a healthy order book, which stood at S$630.7 million as at Oct 2 following recent contract wins totalling S$88 million.
There is also an ongoing oil boom, as oil production has ramped up in 2023.
Lim noted that this rising tide has not lifted all boats, with some shipyards remaining empty. But for Dyna-Mac, it is a different issue. “I committed to our customer to not take projects beyond our capacity, (and so) I had to turn away some jobs,” said the chief executive.
Changing tides
According to Lim, customers are now looking for on-time delivery and cost control amid rising interest rates.
Therefore, there has been a shift in workflows to enable Dyna-Mac’s projects to be completed in a timely manner.
Rather than work on a project part by part, the company now overlaps projects to improve productivity. This creates a continuous workload for the workforce, and balances out the revenue peaks and troughs that project work typically faces.
Rising interest rates have also shifted dynamics within the O&G industry, Lim said, with oil producers now going direct to Dyna-Mac, rather than vessel operators.
This has made timely delivery even more crucial, with an early start to oil production being able to partially or fully offset the cost of the modules.
“Because you are the last end of the baton before they start pumping the oil or gas out of the ground, you become very essential. That’s why you have the ability to talk to them – they need certainty,” said Lim.
To capture increasing demand, Dyna-Mac is expanding its facilities at Gul Road to provide additional capacity to take on more projects.
The company has secured a 4.2 hectare land parcel close to its current facilities, where a new yard will be developed in phases.
The first phase of getting the ground ready for module construction will be done by the first quarter of 2024. Subsequent phases involving the piping shop for hydrogen and ammonia could take a little more time.
“If there is second-hand equipment we can buy, we’ll buy. We don’t have to buy first-hand equipment. Because we know how to use them, we can buy them cheaply and equip out very fast,” said Lim.
Looking ahead, he sees the need to move into other industries outside of O&G.
With Dyna-Mac’s expertise in building specialised modules, there lies the possibility of entering the pharmaceutical space, Lim said.
Modules built in Singapore can be moved to more remote locations as part of a pharmaceutical production plant rather than building everything onsite.
There are also opportunities in the green space, with Dyna-Mac’s expertise in carbon capture from oil production. However, the CEO noted that it does not make commercial sense to do a carbon capture as a service now due to the current carbon taxes.
Other opportunities in the green space include exotic piping for ammonia and hydrogen, which are cleaner fuels.
“We stay niche in what we do best, we are using this time to prepare for the energy transition,” said Lim.
He envisions revenue contributions for Dyna-Mac in the future to be evenly split between its O&G module production and its potential ventures into the green and pharmaceutical spaces.
Meanwhile, Dyna-Mac is also eyeing potential acquisitions to boost growth.
With rising interest rates squeezing margins and starving some companies of work, Lim sees no lack of opportunities.
“We will not go into (a) business we don’t understand, it must be able to build up recurring income or enable us to scale,” he said.