Keppel Corp. Year End Results for 2010
The Directors of Keppel Corporation Limited (KPELF) advise the following unaudited results of the Group for the full year ended 31 December 2010.
The FY 2010 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 Teo Soon Hoe, Senior Executive Director and Group Finance Director, are attached and also available for download below.
FY 2010 Report Card
1. Net profit before exceptional items improved 12% to S$1,419 million, compared to FY 2009's S$1,265 million.
2. Earnings Per Share of 88.7 cents, up 12% from FY 2009's 79.4 cents.
3. ROE remained above 20%.
4. Economic Value Added before exceptional items increased from S$1,026 million to S$1,035 million.
5. Total cash dividend increased to 42.0 cents per share, comprising a final dividend of 26.0 cents and an interim dividend of 16.0 cents already paid.
6. Bonus issue to shareholders of one bonus share for every 10 existing shares.
7. Cash outflow of S$310 million.
8. Net cash of 0.02x, compared to 0.14x in 2009.
Address by Mr Choo Chiau Beng, Chief Executive Officer
The global economy ended 2010 on a mixed note. There continues to be uncertainty over whether the US recovery can be sustained. Consumer and business spending have improved but job creation has been sluggish. Europe is not yet out of the woods as it is still grappling with serious sovereign debt issues after several bailouts fail to restore confidence in the Euro. On a brighter note, Asia has continued to lead the global economic recovery and is expected to remain resilient this year despite signs of inflation. China posted 10.3% growth in 2010, with growth in 2011 expected to be lower but still healthy at 8.7%. India's economy has continued to do well, with growth of nearly 9% expected for 2010-2011. Singapore's dramatic growth of 14.7% last year coming from a low base will be moderated in 2011.
From all indications, oil price is expected to remain above US$70 a barrel in the year ahead.
Another Record Performance
This evening, I am pleased to announce that 2010 was another record year for Keppel Corporation. Net profit grew by 12% to a new high of just over $1.4 billion. For the fourth consecutive year, our Return on Equity has remained above 20%. Economic Value Added has increased to $1,035 million at year end.
With the sterling results, the Board of Directors would be recommending a total distribution to shareholders of 42 cents per share for the whole year. This will comprise the interim dividend of 16 cents per share, and a proposed final dividend of 26 cents per share. In addition to this cash dividend, we are also proposing a bonus issue on the basis of one bonus share for every 10 existing ordinary shares.
Business Highlights in 2010
2010 was a busy year for the Group. Amidst the uneven recovery across the globe, our businesses have worked hard to capture value in regions and sectors of growth.
While waiting for deepwater drilling regulations to be spelt out clearly post-Macondo, the Offshore & Marine industry is seeing renewed interest in shallower waters, and their requirements for newer and safer rigs. This has sparked off a strong pick-up in orders in late 2010 for high specification jackups such as our proprietary KFELS B Class jackups. In the last quarter alone, we managed to secure $1.2 billion worth of new contracts. In expanding our solutions offerings to meet the needs of the market, we also launched a range of new products in 2010. Keppel FELS is partnering leading fleet owner and operator, Seafox, to commercialise our new wind turbine installation vessel design for deeper waters. In early 2010, our joint venture with J Ray McDermott also won a US$1 billion contract from Brazil for its tension leg wellhead platform.
To reinforce our Near Market, Near Customer strategy, our new yard in Santa Catarina was acquired to meet the strong local demand for offshore support vessels, and will complement our BrasFELS yard in offering comprehensive solutions for Brazil's offshore oil and gas industry. Taking a stake in the new Baku Shipyard strengthens our longstanding partnership with SOCAR, and when completed, will help to meet the growing needs of the oil industry in Azerbaijan and the broader Caspian Sea region. Meanwhile, we raised our shareholding in Subic Shipyard in the Philippines to better capture opportunities from the increase in general shiprepair and upgrading work. We also inaugurated the Nakilat-Keppel Offshore and Marine shipyard in Qatar in November, which we are positioning to be the preferred partner for solutions in the Middle East.
In Infrastructure, we officially opened the Keppel Seghers Tuas Waste-to-Energy (WTE) plant, which is one of the most compact WTE plants in the world, in late June. Keppel Integrated Engineering, or KIE, also secured a number of significant contracts, including a contract to provide technology for the largest WTE plant in China, and a second major contract in the UK. At our 3Q results webcast, I have shared that we have encountered cost overruns and delays with our projects in Qatar. The Middle East is a challenging environment to execute large-scale infrastructure projects. We have gleaned valuable lessons from our experience and will be making some provisions for the costs overruns and potential claims for the two projects.
In late June, we successfully listed our green infrastructure trust, K-Green Trust, which will deliver long-term, regular and predictable distribution to unitholders. Last week, the Trust announced better than forecasted performance and is actively seeking to acquire assets with recurring value to grow its portfolio.
In logistics, Keppel Telecommunications & Transportation (KTT) has expanded its capacity in Singapore, China and Vietnam to meet the growing demand for logistics in these markets. With its Arab partner, KTT also achieved initial closing of the world's first Shariah-compliant data centre fund to tap into the growing demand for data centres worldwide. Keppel Energy has also embarked on the S$900 million expansion of its 500 MW co-generation power plant on Jurong Island by another 800 MW to meet Singapore's growing electricity market.
Our Property Division has done well last year, with Keppel Land's net profit surpassing S$1 billion for the first time. 2010 also saw a number of significant milestones. With China now a major component of the regional strategy, we established Keppel Land China to consolidate and sharpen our focus on execution and delivery in this key growth market and maximise value creation. Since then, we have acquired land in Chengdu and Nantong and will continue to scan the market for attractive land acquisitions. The successful completion of the asset swap between Keppel Land and K-REIT Asia involving Phase One of the Marina Bay Financial Centre, and Keppel Towers and GE Towers is a strategic move to unlock value for both companies and ensure that assets are optimally utilised for value creation. K-REIT Asia also made its first foray overseas, acquiring two quality office assets in Australia.
Business Prospects in 2011
Now let me talk about the prospects for our businesses in 2011. Market confidence is returning in the Offshore & Marine industry. Industry experts have projected an increase in E&P spending by major oil companies, in pace with the continued growth in demand for oil. The jackup market is expected to remain active, on the back of the surge of orders late last year, and we will also continue to see good prospects for our deepwater solutions. The drought of newbuild orders until the second half of 2010 has meant that competition for jobs is intense. We have worked hard to build partnerships with our customers who continue to entrust us with their projects, and we will be selective in the orders that we take on to ensure that our yards are gainfully employed and to maximise value from each contract.
The climate change talks in Cancun have given some hope that governments around the world are taking climate change seriously. With unusually severe storms, floods and harsh winter conditions in many parts of the world, the man on the street has awakened to the impact of climate change. Together with the added emphasis on environmental and urban solutions around the world, momentum is also building towards tougher regulations on environmental protection. This presents more opportunities for our environmental engineering arm, KIE, to offer commercially viable solutions for waste and water treatment.
Asia's projected sustained growth will fuel increased demand for energy. In this light, Keppel Energy's capacity expansion is well-timed to meet market demand and capture value. It will also continue to seek opportunities to grow its power generation business both within Singapore and overseas.
Demand for logistics and warehousing services will also increase on the back of Asia's continued growth. KTT will ride on this wave of growing demand to expand in China, Vietnam, Indonesia, and Malaysia as well as at home in Singapore. KTT is also working to grow its data centre business in Singapore as well as abroad.
Despite signs of inflation, there are indications that China and other countries in Asia are taking the right approach to manage the problems and ensure that growth stays on a sustainable footing. As such, regional economic activity is expected to remain reasonably healthy. This augurs well for the office market in the region, presenting opportunities for Keppel Land to develop commercial and mixed developments both in Singapore and overseas as well as for K-REIT Asia to grow its portfolio as a pan-Asian entity.
The cooling measures in Singapore and China will hopefully stabilise the property markets in both countries onto a more sustainable growth path. We believe in the fundamentals of demand from the region's growing middle class for homes and will continue to position ourselves to capture value. The focus is on developing more properties in key markets such as China and Vietnam that have continued to show steady growth.
Our showcase for integrated sustainable urban solutions, the Sino-Singapore Tianjin Eco-City, continues to make steady progress. Our joint venture company with the Chinese has also secured around RMB55 billion of investments to-date, including regional developers that will build a variety of eco-homes as well as eco-technology companies offering urban solutions. With a new CEO, Ho Tong Yen, at the helm this year, we look forward to a new chapter of growth in the Tianjin Eco-City. Keppel's eco-homes in the Eco-City have also been well received by the local market, registering strong sales for the launched units. KIE and KTT are also looking to leverage the Eco-City's position as an eco-research and manufacturing hub to grow their presence in Northern China.
The Group continues to place great emphasis on talent management and succession planning. Through leveraging our collective strength and deploying talents optimally within and across our three businesses, we groom our next generation leaders to ensure sustainable growth for the Group.
We are happy to have achieved another record performance this year, but we are aware that it would be challenging to surpass this in 2011. Nonetheless, with our 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.