Published January 23, 2009

Keppel profit dips in absence of one-time gains

Net earnings fall 2.9% to about $1.1b but rises 18% at operating level

By VINCENT WEE

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KEPPEL Corp saw a 2.9 per cent dip in full-year 2008 net profit to about $1.1 billion - from about $1.13 billion in 2007.

Including minority interests, net profit dropped 20 per cent to $1.32 billion from 2007's $1.65 billion. 2007 recorded exceptional gains of $565 million, contributed by fair value gains on investment properties. The attributable exceptional gain was $105 million after taxation and minority interests.

Before exceptionals and minority interests, net profit rose 6.9 per cent to $1.096 billion.

At the operating level, net profit rose 17.9 per cent to $1.24 billion. Full-year revenue remained strong, growing 13.2 per cent to $11.81 billion and fourth-quarter revenue rose 11 per cent year-on-year to $3.73 billion. Earnings per share for 2008 were 69 cents and the group proposed a final dividend of 21 cents per share. The group also took prudent steps to ensure a net cash position of 0.04 times. Free cash flow for the year came up to $1.88 billion.

'We are very busy in 2009, we have 14 rigs to be delivered so the yards will be very busy,' said CEO Choo Chiau Beng. He warned, however, that further order cancellations and payment rescheduling negotiations will happen but the key would be to ensure that Keppel comes out of the situation better off than its customers.

'We have contracts in place (and) . . . such negotiations will carry on all the time and I think so far we have strong positions to negotiate,' said Mr Choo.

By segment, the offshore and marine division still accounted for the bulk of 2008 revenue and its contribution to overall revenue rose 18 per cent to $8.57 billion.

Net profit attributable to shareholders from the division rose to $698.5 million from $441.3 million, making up more than half of overall earnings. Looking ahead, new rig orders are expected to slow down, said Mr Choo but he expects some conversion and repair jobs to come in.

'The potential E&P activities in the deepwater and arctic regions will present opportunities for our yards in the construction of rigs and specialised vessels,' said group finance director Teo Soon Hoe.

Property continued to weigh on full-year revenue, coming in 48 per cent lower at $950 million.

The most significant improvement came from the infrastructure division where revenue nearly doubled to $2.23 billion mainly due to revenue from Keppel Energy on higher electricity prices.

Net profit from investments fell to $162.4 million from $269 million, with lower contribution from associate Singapore Petroleum Company and fair value losses of securities cited as factors.

Keppel shares closed unchanged at $4.04 yesterday.