Published February 25, 2009

Rotary Engg earnings dip to $50.9m

Final dividend of 2.3 cents a share declared, translating into a yield of 11%

By VEN SREENIVASAN

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RIDING on a strong fourth quarter, mainboard-listed Rotary Engineering posted net earnings of $50.9 million on revenue of $520.1 million for the year ended December 2008, and is paying a generous dividend.

Mr Chia: The priority is to ensure prudent financial and risk management this yearwhile developing existing businessesand moving into markets like Africa

Profit was down slightly from $52.8 million in FY 2007, but revenue was up from $510.2 million that year.

Rotary declared a final dividend of 2.3 cents a share, translating into a yield of 11 per cent.

The company said the economic climate is challenging but it is optimistic about the current year.

'These are difficult times and nobody can claim to be unscathed by the global economic crisis,' said executive chairman Chia Kim Piow. 'But adversity is nothing new to Rotary - and we are well placed to ride the storm.

' We have a critical presence in key markets, a strong customer base that is sticking with us, a solid order book, no debt and enough cash to enable us to capitalise on opportunities that may arise in current market conditions.'

Orders completed in 2008 included a joint-venture hydrocarbon industrial waste project with Italy's Sofinter group, facilities for Power Seraya and a chemical process plant for JGC Singapore.

Rotary, which specialises in building energy storage and distribution terminals on Jurong Island and elsewhere, had an order book of $446 million and cash of $157.4 million coming into the current year.

The stock's net tangible asset backing per share was 36 cents, significantly above the counter's current price of 20.5 cents.

Mr Chia said gross margin at 23.7 per cent - versus 24.4 per cent in 2007 - is stable.

Rotary has more than $400 million of active projects on Jurong Island, including Shell's Houdini project, the Parallel Train project, ExxonMobil's second petrochemical project and Neste Oil's next generation bio-fuel manufacturing plant - the world's biggest.

In November last year, Rotary announced a $28 million contract with Oiltanking Odfjell Singapore that boosted its 2008 contracts with the group to $130 million.

Farther afield, it is growing its presence in the Middle East.

Early last year, it increased its stake in joint venture company Petrol Steel in Saudi Arabia to 51 per cent, and announced a US$62 million deal to build 24 tanks for the Saudi Kayan Petrochemical Complex at Al-Jubail.

Mr Chia said: 'We have a good cash position, zero debt and a strong business. Our priority is to ensure prudent financial and risk management this year, while developing existing businesses and moving into markets like Latin America and Africa. We will also look at M&A (merger and acquisition) possibilities as they arise.'

The company is also pushing ahead with a plan to put in place a globalised workforce in all key markets.