Keppel Details FY 2011 Results

press release
Thursday, January 26, 2012

The Directors of Keppel Corporation Limited advise the following unaudited results of the Group for the full year ended 31 December 2011. The FY 2011 Report Card and the Address by Mr Choo Chiau Beng, Chief Executive Officer, are below. The full set of financial documents for the results and the Address by Mr Loh Chin Hua, Chief Financial Officer, are shown below:


Another Record Performance


I am pleased to announce that 2011 was yet another record year for Keppel Corporation. Our net profit grew by 14% to a new high of nearly $1.5 billion. This is the fifth year running that our net profit has surpassed the $1 billion mark. Also for the fifth consecutive year, our Return on Equity has remained above 20%. Economic Value Added has also increased to $1,024 million for the year.


Final Dividend


With these strong results, the Board of Directors will be recommending a total distribution to shareholders of 43 cents per share for the whole year. This will comprise the interim dividend of 17 cents per share, and a proposed final dividend of 26 cents per share.


Difficult Environment


2011 was an eventful year, which saw natural disasters and political and economic turmoil around the world. We started 2012 amidst a weak global economy. Europe's sovereign debt crisis has deepened in the last quarter, weighing down the global economic outlook. With the contagion spreading to more Eurozone countries, any resolution will be long in coming. There also continues to be uncertainty over the US economy with job creation remaining sluggish. China's growth is expected to moderate further. In Singapore, slower growth is expected for the coming years. Oil prices have strengthened in 2011 and are expected to remain firm this year, with WTI crude currently around US$100 a barrel and Brent crude around US$110 a barrel.


Business Highlights in 2011


Amidst the volatile economic environment around the globe, our businesses have worked hard in 2011 to capture value in regions and sectors of growth and opportunity. In 2011, our Offshore & Marine Division was able to capture a good share of the global high specification jackup orders, ending the year with a record level of orders secured totalling $10 billion. Most of these new orders were for our proprietary designs, in particular our KFELS B Class jackup which is now setting the standard for the industry. We also successfully launched our KFELS Super A Class jackup. We are delighted that our customers have continued to entrust us with their projects and we remain committed to building close partnerships with them to deliver solutions tailored to their needs. On the back of our proven track record to deliver on time, on target in Brazil, we have also secured the first deepwater drilling rig for our Angra yard from Sete Brasil. This rig will be built to our proprietary DSS38E design and we will work hard to ensure that we meet our customer's expectations.


Last year, we successfully delivered a total of 40 major projects on the back of enhanced productivity, careful management and the dedication of our project teams.


Keppel has also moved into adjacencies in our Offshore & Marine business, adding a new dimension to our business model to capture more value. In Brazil, we are moving to build offshore support vessels in anticipation of demand, which will be offered for bare-boat charter or sale upon completion. Our investment in Dyna-Mac, a topside module fabricator, strengthens our capabilities as a core solutions provider in floating production systems. Early this year, we also expanded our suite of solutions for offshore wind farm installation with the acquisition of proprietary jacket foundation technology. These are strategic moves into niche areas from which we hope to see recurring income in the years ahead.


In Infrastructure, Keppel Energy continued to see good earnings momentum from its power plant on Jurong Island. In October, Keppel Integrated Engineering (KIE) completed the handing over of the Domestic Solid Waste Management Centre in Qatar, and started the operations and maintenance phase of this project. KIE is now focusing on the completion of the Doha North Sewage Treatment Works project. Keppel Telecommunications & Transportation (Keppel T&T) expanded its warehousing capacity in Singapore and China to service the healthy demand for integrated logistics services in these markets. Keppel T&T has also expanded its quality data centre portfolio to tap the growing demand for data centres worldwide.


In 2011, the external environment was a difficult year for Property. In two of our key markets, Singapore and China, governments rolled out a series of cooling measures to stabilise home prices. Nonetheless, we managed to sell 2,500 units in Singapore and the region. K-REIT Asia's acquisition of Keppel Land's stake in the Ocean Financial Centre last year is a strategic move for both companies. K-REIT Asia has now grown to become one of the top office REITs in Singapore with a sterling portfolio of Grade A offices in the heart of our financial district. With a strengthened balance sheet, Keppel Land will be able to scout for good sites and assets at attractive prices.


Prospects in 2012


Let me now touch on the prospects for our businesses in 2012. In Offshore & Marine, we will focus on executing the orders that we have secured, maintaining our track record for on-time, on-budget deliveries and extracting maximum value from each project. Global demand for oil is projected to continue rising. Major oil companies have also announced increased budgets for exploration and production to address the decline in production capacity and replace depleting reserves. Dayrates have been strengthening for both jackups and semisubmersibles. With offshore drilling moving towards deeper waters, we are also seeing improving prospects for our deepwater solutions.


Over the past year, our new proprietary products have been gaining market acceptance. Our three KFELS N Class jackups, designed specifically for the harsh environment in the North Sea, have started working for their owner. Our first multi-purpose self-elevating platform has also secured a charter for wind farm foundation work in the North Sea. The accommodation semisubmersibles we delivered have also clinched long-term charters. Our KFELS Super A Class jackup for Ensco and a semisubmersible drilling tender for Seadrill, both ordered last year, have already been awarded charters. We are confident that with continued innovation, our proprietary designs will meet the evolving needs of the industry and believe that like the KFELS B Class jackup design, they will in time become the industry benchmark.


In our Infrastructure Division, Keppel Energy's 800 MW expansion of its existing 500 MW co-generation power plant on Jurong Island is on schedule for completion to meet the sustained energy demand in Singapore.


In Asia, urbanisation continues unabated. Last year, China witnessed a milestone of having more of its population living in cities than in rural communities. Many cities elsewhere in Asia are also growing rapidly. Rapid urban growth has also sparked concerns and interest in tougher regulations for environment protection and in minimising carbon emission. This trend will create demand for environmental and urban solutions around the world, especially in Asia, presenting more opportunities for KIE to offer commercially viable solutions for waste and water treatment.


Demand for logistics and warehousing services is expected to be sustained with Asia's continued growth. Keppel T&T will capture value from its enhanced logistics network with its recent capacity expansion in China and Southeast Asia. With the strong growth in global cloud-computing needs, Keppel T&T is also looking to grow its data centre business in Singapore and abroad.


Despite signs of moderation, Asia's growth is expected to remain on a sustainable footing. Net office demand is likely to remain positive in 2012 with new entrants setting up businesses here in Singapore. As such, office rentals are expected to stay healthy. Keppel's well-located office buildings have continued to command good rentals, with prospects of upward revisions for rental renewals. We will also continue to grow our property fund management business, scanning for good opportunities to enhance our portfolio of quality assets.


We continue to believe in the fundamentals of demand from Asia's growing middle class for homes and will continue to position ourselves to capture value. Keppel Land will continue to seek out good sites at attractive prices in our key markets of Singapore, China, Vietnam and Indonesia.




These past few years have been a period of uncertainty and volatility in our external environment. 2011 was difficult. 2012 will not be any easier. Europe will remain the main headwind in 2012 as a solution requires political resolve, courage and economic pain. At Keppel, we are aware of the mounting challenges in the year ahead. Nonetheless, with Keppel's hallmark Can Do! spirit, we will strive to build on our core competencies, sharpen our competitive edge, strengthen our businesses for sustainable growth, and focus on delivering value to our shareholders, while continuing to make safety a top priority in all our business units.

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