Published April 24, 2009

Keppel Q1 net profit increases 9% to $285.3m O&M division remains as largest profit contributor at 64 per cent By VINCENT WEE Email this article Print article Feedback KEPPEL Corp posted a 9 per cent rise in first-quarter profit to $285.3 million, from $261.7 million a year ago, despite the the global economic downturn. Revenue was also healthy, rising 35 per cent to $2.98 billion from $2.21 billion for the previous corresponding quarter. Earnings per share rose 8.5 per cent to 17.9 cents from 16.5 cents. Meanwhile, annualised return of 22.4 per cent was at the same level as FY2008. The group also benefited from a write-back of $14 million for taxation as a result of the reduction in Singapore tax rate. The offshore and marine division (O&M) remained the largest profit contributor at 64 per cent, followed by investments with 14 per cent, property division with 12 per cent and infrastructure division with 10 per cent. Revenue from the key O&M division of $2.12 billion was 51 per cent higher despite the lower level of new orders secured in the first quarter as the division benefited from progressive recognition of revenue as it executed on its order book accumulated at the end of 2008. O&M reported a 41 per cent higher pre-tax profit of $239 million due to the higher revenue and improved operating margins. Revenue from the infrastructure division increased by 26 per cent to $634 million with the maiden engineering, procurement and construction (EPC) revenue recognition from the Doha North Sewage Treatment and Water Re-use plant (Doha North) project in Qatar contributing. Pre-tax profit from this division jumped one-and-a-half times to $42 million on contributions from the Doha North project and better performance by the Keppel Merlimau cogen power plant. In line with prevailing conditions however, the property division saw pre-tax profit fall 30 per cent to $74 million due to lower revenue of $222 million, which was 26 per down from previously. Share of profit of associated company Singapore Petroleum Company also declined because of lower refining margins, crude prices and the provision for impairment of the Jeruk discovery. The completion of several residential projects in Singapore and overseas in the last financial year and no significant sales in the current year hit revenue. Rental income from investment properties increased due to higher effective rental rates and occupancy, and fund management income was also higher. Looking ahead, O&M secured a modest $315 million of new orders in the first quarter of 2009 while the net order book stands at $9.5 billion with deliveries into 2012. On the property market, however, Keppel remained sanguine. 'Sentiments for property market remain subdued. Sales of Singapore private residential properties in the first quarter of this year have picked up but prices have fallen. The group has deferred the construction of Marina Bay Suites and Madison Residences, and delayed the launch of the second phase of Reflections at Keppel Bay until market conditions are more favourable,' Keppel said. The group, however, added that sales of residential township projects in China in Q109 were at a slower pace but encouraging while the property market in Vietnam and India remain weak. 'The group is monitoring the markets closely and will launch its residential projects when confidence improves,' Keppel added.