Singapore: Keppel’s CEO Pleased with 2nd Q Results and Offshore & Marine Business Progress
Address by Mr Choo Chiau Beng, Chief Executive Officer:
Uncertain Global Environment
The past quarter has seen a slowdown in the momentum of the global recovery due to the manifold concerns over a possible spread of the Eurozone crisis, volatility in global currencies as well as the long-term sustainability of China’s growth. Latest figures show unemployment remains a serious problem in developed economies, and Europe and the US are expected to see an extended period of low growth.
On the other hand, Asia has been resilient, and the region is now the main driving force for the global recovery. The International Monetary Fund has raised Asia’s growth forecast this year to 7.5%, with China and India expected to grow by 10.5% and 9.4% respectively. Although there are risks of credit and asset bubbles, the general prognosis for Asia is positive. China’s moves towards a more flexible regime for the renminbi may also benefit regional countries. Oil prices have remained stable within the band of US$70 to US$80 a barrel.
Singapore’s economic growth has continued to outpace projections. Official figures show that Singapore grew by more than 20% in the past quarter and the government has forecasted that growth this year will be in the range of 13% to 15%, up sharply from an earlier prediction of 7% to 9%.
Sustaining Good Performance
I am happy to report that for the first half of this year, Keppel Corporation has again turned in a better performance than the same period last year. Our net profit for the first half has increased 11% from last year to $669 million, while our annualised ROE remains above 20%. Economic Value-Added increased from $452 million to $493 million. We will be paying out an interim distribution of 16 cents per share.
Encouraging Business Developments
Amidst the volatile external environment, Keppel has seen a number of encouraging developments for our key businesses over the first half of this year.
In the area of Offshore & Marine, the work on our expansion in key markets such as Brazil, the Caspian Sea and the Middle East is making steady progress. Our new yards in Brazil’s Santa Catarina and Baku, Azerbaijan, will complement our existing yards in those countries and place us well to meet the needs of these growing markets. We have also submitted a number of bids for rig tenders by Brazil’s national oil company, from which we hope to secure a share of the orders.
Global oil consumption is projected to continue growing in the coming years, with strong demand from emerging economies. The Gulf of Mexico oil spill has understandably caused some industry players to adopt a wait-and-see attitude on new rig orders and this has in turn impacted our orderbook. However, this phase will pass. In the interim, our level of enquiries has remained healthy and we continue to focus on executing our projects well, on time, on target, safely and within budget.
Our Infrastructure Division too has seen a number of major milestones for the first half of this year.
On 29 June, we successfully listed K-Green Trust, a green infrastructure trust that will deliver long term, regular and predictable distribution to unitholders. With an initial portfolio of quality assets in Singapore, K-Green Trust will leverage Keppel’s international network and well-established expertise to seek acquisition opportunities in Asia, Europe and Middle East.
The Keppel Seghers Tuas Waste-to-Energy (WTE) plant, one of the three plants under K-Green Trust, was officially opened on 30 June. Constructed by Keppel Seghers, a subsidiary of Keppel Integrated Engineering, or KIE, this is the first WTE plant in Singapore to showcase WTE technologies from a local company. It is also one of the most compact WTE plants in the world, and supports Singapore’s aim of building a sustainable quality environment amidst land scarcity. Together with the Senoko WTE Plant, Keppel now treats almost half of Singapore’s incinerable waste.
Earlier this year, KIE also secured two contract wins in China, one of which involves providing technology for what will be China’s largest WTE plant, in Shenzhen. KIE is well positioned to meet the demands of the growing China market, where it holds a leading share. KIE will also continue to pursue opportunities in Europe and the Middle East. While the financial crisis has slowed down the decisions by municipal governments to embark on large-scale projects, there is growing global demand for sustainable urban solutions and KIE will continue to seek opportunities to tap this demand.
With the opening of three new distribution centres, Keppel Telecommunications & Transportation tripled its logistics footprint in Vietnam, enhancing its services to the urban and industrial regions in both North and South Vietnam.
Keppel Energy’s work on the expansion of our power plant on Jurong Island is also on track.
In Property Division, we have positioned ourselves well to capture value from the growth in regional markets in the first half. Private home sales in Singapore have continued to stay healthy while in the commercial segment, returning business confidence has boosted leasing activities and rentals. We have seen good take-up in Ocean Financial Centre, and Phase 1 of Marina Bay Financial Centre is effectively fully leased. The Chinese government’s cooling measures have injected some stability and rationality into the property market and we see this as a positive move. Sales in our Chengdu and Wuxi townships have remained healthy, reflecting a real demand for homes by the growing urban middle class.
The Sino-Singapore Tianjin Eco-City project is progressing steadily. Our joint venture company has attracted developers and other partners to the project with total investment commitments of almost 43 billion RMB. The first Keppel homes there will also be launched within the next few months, when we begin to tap the local Tianjin market interest in the Eco-City.
As part of our vision, Keppel aims to be a provider of choice for solutions to sustainable environment and urban living. We will continue to marry our core competencies in environmental engineering, power generation, logistics and green data centres as well as property and township development, and strengthen the synergy among our businesses, to provide holistic solutions for sustainable urbanisation.
Our synergistic competencies in all our businesses mean that Keppel is uniquely positioned to leverage the urbanisation growth trends in China and other developing countries Asia like Vietnam and Indonesia to sustain value creation for all our stakeholders, and we see this as an area of strong potential for our earnings growth in the coming years.
1H 2010 REPORT CARD
1. Net profit improved 11% to S$669 million compared to
1H 2009’s S$603 million.
2. Earnings per share of 41.9 cents, up 11% from 1H 2009’s
3. Annualised ROE remained above 20%.
4. Economic Value Added before exceptional items increased
from S$452 million to S$493 million.
5. Cash outflow of S$859 million.
6. Net gearing of 0.01x.
7. Interim dividend increased 7% to 16.0 cents per share.
Source: Kepcorp,July 22, 2010;