Published August 20, 2008

Boustead H1 profit more than doubles to RM382m

Plantation, naval ship building units main drivers of earnings growth

By PAULINE NG
IN KUALA LUMPUR
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DESPITE global and local economic uncertainty, Malaysia's state-owned Boustead Holdings more than doubled its first-half profit to RM382 million (S$162 million) on turnover of RM3.9 billion.

The big improvement in the six months to end-June was due mainly to two divisions - plantation and naval ship building.

Thanks to record prices for crude palm oil, pre-tax profit from plantations more than doubled to RM178 million, from RM67 million a year earlier.

The heavy industries division was close behind, contributing RM150 million as a result of consolidation of earnings from new subsidiaries Boustead Naval Shipyard and listed unit Boustead Heavy Industries Corporation (BHIC).

The property division also performed well, posting a 21 per cent rise in pre-tax profit to RM53 million, due mainly to sales of corporate lots and better earnings by Royale Bintang hotels and The Curve shopping mall.

The trading division, led by BHPetrol, registered a four-fold increase in pre-tax profit to RM45 million, from RM14 million previously, mainly on stronger commodity prices, especially mineral oil.

Despite the diversity of Boustead's businesses, its shipbuilding division under BHIC attracts the most attention because it has a multi-billion government contract to build 27 offshore patrol boats for the navy.



Owned 64 per cent by the Malaysian Armed Forces Pension Fund, BHIC has had to fend off claims that the first two vessels were delivered late, above budget and full of defects.

Because of its shareholding, analysts do not expect the government to cancel the contract. BHIC has said that it will deliver two more boats next year and another two by 2009-10.

The Boustead group took over the contract after distressed shipbuilding and repair company PSC Industries (PSCI) was restructured last year and renamed BHIC.

PSCI, previously controlled by tycoon Amin Shah Omar Shah, an associate of former finance minister Daim Zainuddin, was the buyout vehicle for state-owned Naval Dockyard. PSCI bought the shipyard at Lumut, Perak, for RM300 million and assumed its rights to build the 27 naval boats, as well as maintain and repair all navy vessels, for a lucrative RM24 billion.

But Mr Amin's project ran aground after the Asian financial crisis of the late 1990s, when hefty loans left him and the company overstretched.

The coming parliamentary by-election in Permatang Pauh next Tuesday, which will pit the National Front's Arif Shah - Mr Amin's brother - against de facto opposition leader Anwar Ibrahim, has put PSCI in the limelight. Some politicians are playing up the fact that Mr Arif is Mr Amin's brother, though Mr Arif has said that he was not involved in PSCI.

In a statement yesterday, Boustead group managing director Lodin Wok Kamaruddin said that the company is confident of sustaining its H1 results. 'We are very pleased we have delivered above and beyond our expectations in conditions that are totally subject to increased variables and heightened uncertainty,' he said.

Earnings per share was 24 sen, down from 27 sen previously. Directors have declared a second interim dividend of five sen, bringing the total H1 dividend to 10 sen.