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Exploiting aerospace

Exploiting aerospace
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T7 Global turned from an O&G company into a total industrial solution provider

By NUR HANANI AZMAN & MUHAMAD AMIR AIMAN AZLAN

T7 GLOBAL BHD aims to expand its footprint in the growing aerospace sector, which has attracted some RM20 million investment for land acquisition, construction of buildings and purchase of machinery and equipment since 2017.

Speaking to The Malaysian Reserve (TMR), T7 Global chairman Datuk Seri Dr Nik Norzrul Thani shed light on the company’s corporate plans and outlook after building a sizable work order book and reputation in the oil and gas (O&G) business since 1990.

T7 Global’s net profit jumped 33.66 per cent to RM1.35 million in the second quarter ended June 30, 2021 (2Q21), from RM1.01 million a year earlier, on higher contribution from its energy division.

The company’s revenue for the quarter increased 49 per cent to RM54.19 million from RM36.39 million a year ago due to the recovery in O&G activities in the region having a positive impact on its ongoing projects.

Below are some of the key talking points from the online interview.

Can you share how the company started and manage to go from red to black?

Tan Sri Tan Kean Soon and I took over the company in 2015 and undertook a transformation programme. It was a tough time for us as an O&G company as we had a lot of governance issues we had to clean up, and legacy issues needed to be cleared.

Crude oil prices had fallen, and it was a bit of a shock. But we’re lucky we came in new and were able to see things differently. So, we focused on diversification from O&G into a business that was not affected by the oil price. We also started to focus on maintenance as we’re doing now — relying on 5-10 years contracts.

We turned T7 Global from an O&G company into a total industrial solution provider. I think it’s a question of perspective. O&G companies are still there, they are relying on oil prices, but for T7 Global, besides O&G or energy, as we call it now, we have gone into aerospace and defence and construction.

It is a more specialised construction and more high industrial-based construction work. We want to be known as a high-value industrial solution provider. We had a lot of highly skilled workers, and thanks to the downturn of O&G at the time, we were able to reskill them to go into aerospace.

We trained and invested in people. Investment in human capital is essential for us. We were pretty lucky when transforming the company. We had a low gearing level that would impact our cash flow. We got some loans because we have a big project — a mobile offshore production unit (MOPU) contract worth RM1 billion.

That is our primary project, and we will start to see payment coming in next year onwards. Tan and I tell ourselves it’s not a sprint but a long game because we are here for the long term.

We are blessed with our loyal shareholders. We started to give dividends in the last few years as we have turned around, but it wasn’t easy. Turn around sounds good, but it’s a lot of stress. But it makes us a better person.

What is your outlook for economic conditions and T7 Global?

We are bullish with businesses opening up, and consumer confidence remains good. As we are in an endemic environment, we have to be cautious, and at the same time, we need to restart. T7 Global is quite fortunate because we have order books.

We did not panic when Covid-19 hit as we were able to manage. But with Malaysia stepping up vaccine distribution, things will be at least as normal as possible under the circumstances. The 12th Malaysia Plan (12MP) boosted businesses and foreign investment to come back again.

Moving forward, what is T7 Global’s plan?

T7 Global has an order book of about RM2 billion for the next 10 years. We are bidding for about RM3 billion worth of work contracts. It was fortunate when we were in aerospace. We had a lot of support from the government and a lot of accreditations.

In aerospace, accreditation is essential. We have to be accredited by Boeing and many other international bodies — we are on the verge of getting that. We have a high-value manufacturing facility in Serendah. We have staff trained.

We had a relationship with the Institusi Kemahiran MARA, where we took fresh graduates and sent them to Mexico to be trained by our partner to learn about AeroTech. However, when everything was ready to take off, Covid-19 hit.

We were lucky in the sense that we were not at full blast, but we had already spent. The management was good. They were able to manoeuvre, and there was a better “treatment plan”.

So, despite orders down since the whole aerospace industry was in a bit of a shock, we were able to transform and survive by going on aeroplanes and other metal treatment manufacturing cars. With things picking up, we see fresh orders coming, and we are ready.

Our fully automated metal surface treatment plant is among the most advanced in Southeast Asia. So, you can imagine the potential we have. With the support from the State and federal governments, we are very confident moving forward. The aerospace industry is one of the key strategic industries under the 12MP.

We are very selective where we go because we don’t want to be a “Jack of all trades, master of none”.

How much of the group’s revenue is contributed by the Energy business? How about aerospace?

Right now, 70 per cent is from the energy business and 30 per cent for the others. We think aerospace can take a more significant chunk of our revenue. We are stable as far as our energy division is concerned, but we need some time to get the aerospace business up and running.

One thing about aerospace is that once you are in, you are solid because you are accredited. But to get in, the high cost is where the key is. The company’s aerospace and defence division business is picking up its metal surface treatment facility, receiving more jobs from local and international customers in the first half of 2021.

Can you share your plan on T7 Global’s recent private placement?

T7 Global has proposed a private placement of up to 20 per cent of its issued shares to raise to RM43.93 million, earmarked mainly to finance the group’s working capital requirements.

We are looking for a strategic partner or investor that can add value capital. We are alright, especially once the MOPU comes in. We have been postponing this private placement for a while as we are looking for the right partner. — @Green

Tags: @green November/DecemberaerospaceT7 Global
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