Japanese floating production giant Modec has reported a net loss of US$16.6 million in the first quarter of 2022 as it pulls itself out of difficult financial times in the recent past.

The company is predicting a return to profitability in 2022, with a full-year net profit forecast of $22 million.

This compares to a net loss last year of $363 million attributed to extra costs on Brazilian FPSOs.

Provisions for additional costs were attributed to the FPSOs Cidade de Guanabara MV31 and Anita Garibaldi MV33, while an impairment was recorded on FPSO Santos MV20.

Future expected repair costs were recognised on the FPSOs Cidade de Macae MV15, Cidade de Niteroi MV18 and Cidade de Santos MV20.

In the years 2020 and 2019, Modec recorded net losses of $131 million and $166 million, respectively.

In the first quarter of this year, the $16.6 million net loss was due to the low profitability of FPSO construction projects caused by the Covid-19 pandemic from the previous year and the increased repair costs of FPSOs operating in Brazil, said Modec.

"In addition, an increase in finance costs from foreign currency exchange loss due to the significant appreciation of the Brazil Real against US dollars and the recognition of expected credit loss for the additional loan to the related company which owns an FPSO" contributed to the net loss, added Modec.

Going concern issue

Last year's financial loss resulted in a breach of Modec's financial covenants of bonds and borrowings, which caused a going concern issue.

"However, the company addressed the current situation to the lenders to resolve going concern issue and obtained the agreement not to address acceleration clause with regard to bonds and borrowings in breach of the financial covenants both at the end of previous year and the first quarter of this year. Therefore, the company has judged that there is no significant uncertainty exists in the company’s status as a going concern."

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