The Directors of Keppel Corporation Limited advise the following unaudited results of the Group for the first quarter ended 31 March 2010:
1Q 2010 Report Card
1. Net profit improved 13% to S$322 million compared to 1Q09.
2. Earnings per share of 20.2 cents, up 13% from 1Q09’s 17.9 cents.
3. Annualised ROE remained above 20%.
4. Economic Value Added increased from S$211 million to S$240 million.
5. Cash outflow of S$501 million.
6. Net cash decreased from 0.14x to 0.07x.
Address by Choo Chiau Beng, Chief Executive Officer
Recovery Gaining Momentum
The first quarter of this year saw the global recovery gaining momentum. The latest figures indicate that the recovery in the US is gradually broadening to embrace the manufacturing and services sectors, with signs of a turnaround in the labour market.
Across in Europe, while recovery seems to be tentative, there appears to be improved business confidence. Economic growth in Asia has certainly remained firm. China grew by 11.9% in the first quarter of the year. Surpassing expectations, Singapore’s economy grew by 13.1% in the first quarter, resulting in forecasts for 2010 to be raised to a higher range of between 7% and 9%. In pace with the economic recovery, the credit situation has eased somewhat and since the start of April, oil prices have hovered above US$80 a barrel.
Sustaining Good Performance
Against this backdrop, I am happy to report that for the first quarter of this year, Keppel Corporation has turned in a better performance than the corresponding period last year. Net profit for 1Q’10 was $322 million, a 13% improvement over the same quarter last year. EVA has improved from $211 million, to $240 million.
With the improving economic environment, the outlook for Keppel’s key businesses is brightening.
A number of forecasts indicate that global oil consumption will continue to grow in the coming years, due to strong demand from emerging economies such as China, which has now overtaken the US as the world’s largest car market, with 13.5 million cars sold for domestic consumption in 2009. With the higher oil price and improved sentiments, orders are returning in the offshore and marine industry. While we do not anticipate the same high as the previous peak, our level of enquiries has continued to be healthy. The orders that Keppel Offshore & Marine has secured in the first quarter is close to that for the entire year of 2009.
To reinforce our Near Market, Near Customer strategy, we are judiciously increasing our capacity in key markets such as Brazil, the Caspian Sea and the Middle East. In particular, our newly acquired yard in Brazil’s Santa Catarina and our stake in a new yard in Baku, Azerbaijan, will complement our existing well-established yards in those countries. With the increasing emphasis on local content requirement, these moves will position us well to meet the needs of these growing markets.
Our Infrastructure Division is working hard to ride the gathering momentum of the trend towards sustainable solutions. Keppel Integrated Engineering, or KIE, started off the year with two contract wins in China, one of which involves providing technology for the expansion of an existing WTE plant in Shenzhen which will eventually become the largest in China. KIE is well positioned to meet the demands of the growing China market, in which it holds a leading share. Other markets with good potential are the UK and the Middle East, where KIE is growing a good portfolio of projects.
Meanwhile, Keppel Telecommunications and Transportation has opened a new data centre facility in Singapore. Additional warehousing capacity in Hanoi and Ho Chi Minh City in Vietnam will come on stream in the coming months while a new distribution centre in Foshan, China will be operational in the second half of the year.
In power generation, Keppel Energy is planning the expansion of our power plant in Jurong Island to meet the growing needs of the Singapore market. It is also diversifying its energy sources, having recently signed a conditional agreement to purchase LNG from British Gas.
For our Property Division, regional markets have continued to register growth in the first quarter. Private home sales in Singapore have stayed strong. In the commercial segment, leasing activities have picked up with returning business confidence. Phase 1 of our Marina Bay Financial Centre is now effectively fully leased, ahead of its completion later this year. Our sales in China have remained healthy, reflecting a real demand for homes by the growing middle class in urban centres. In one of our Chengdu projects alone, more than 300 units were sold over the long weekend holiday in China earlier this month. The Chinese have since introduced a fresh round of measures to cool the property market.
Keppel has firm fundamentals. We are well poised to ride an economic upturn and capture more value for the Group’s sustainable growth, both organically and through acquisitions. However, there are cautions that the upturn may not be very robust.
We will continue to strengthen the synergy among our businesses. With the growing demand from the need for a more sustainable environment through increasing urbanisation, particularly in Asia, we see opportunities in marrying our competencies in environmental engineering and property to develop integrated townships in China, Vietnam and Indonesia. The Sino-Singapore Tianjin Eco-City is well on its way to become a commercially viable and sustainable showcase for China with its integrated eco-friendly residential, commercial, industrial and cultural-leisure developments.
Last year, we benefited from our enhanced productivity and operational efficiencies. This is an area we will continue to hone. To stay ahead of competition, we will also further strengthen our execution excellence and technology across the Group.