Keppel Corporation Limited Unaudited Results for the First Quarter Ended 31 March 2011

The Directors of Keppel Corporation Limited advise the following unaudited results of the Group for the first quarter ended 31 March 2011.The 1Q 2011 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.
1Q 2011 Report Card
1.    Net profit improved 7.8% to S$346 million, compared to 1Q 2010's S$321 million (restated).
2.    Earnings Per Share of 21.5 cents, up 7% from 1Q 2010's 20.1 cents.
3.    Annualised ROE of 19.3%.
4.    Economic Value Added of S$225 million.
5.    Cash outflow of S$20 million.
6.    Net cash remains at 0.02x.
Address by Mr Choo Chiau Beng, Chief Executive Officer
Challenging External Environment
The global economic recovery is slow, with developing countries expected to expand faster than the advanced economies. The US economy continues to recover gradually, with some improvement in job creation and consumer spending in the past few months. While some European countries are seeing better growth, Europe as a whole remains mired in sovereign debt issues. The world's third largest economy, Japan is grappling with the aftermath of a three-fold disaster. Notwithstanding Japan's woes and rising inflation, Asia's overall growth is expected to remain resilient, led by China and India which are projected by the IMF to grow by 9.6% and 8.2% respectively. In Singapore, growth for the full year is expected to moderate in the range of 4-6%. The political turmoil in the Middle East and North Africa region has resulted in oil prices moving beyond US$100 a barrel.
Sustaining Good Performance
Against this challenging backdrop, I am happy to report that for the first quarter of this year, Keppel Corporation has turned in a better performance than the corresponding period last year. Net profit for 1Q2011 was $346 million, a 7.8% increase over the same quarter last year. Annualised ROE remains healthy at 19.3% and we achieved EVA of $225 million.
Business Prospects in 2011
Despite the challenging external environment, the improving global economy means that the prospects for our key businesses remain good.
The returning market confidence in the Offshore & Marine industry has translated into a strong flow of orders in the first quarter. Our Offshore & Marine Division secured $4.5 billion worth of new orders in the first quarter, more than what was secured for the whole of 2010. Since then, in the first weeks of April, we have secured a few more contracts, bringing the total of new orders secured year to date to $5 billion. With the budgeted increase in E&P spending by major oil companies, in pace with the continued growth in demand for oil, we expected the market for high-specification jackups to remain active. The issue of deepwater drilling permits in the Gulf of Mexico has gradually resumed, and we expect to see continued good prospects for our deepwater solutions. We will continue to strengthen partnerships with our customers to deliver projects that meet their evolving needs as well as ensure that we extract value from each contract.
Our Infrastructure Division continues to work hard to seize opportunities for value creation in the global move towards sustainable solutions. Our environmental engineering arm, Keppel Integrated Engineering (KIE), is participating in several tenders in the UK for energy-from-waste plants. The ongoing work to expand our power plant in Jurong Island is progressing well. Keppel Energy will also continue to seek opportunities to grow its power generation business both within Singapore and overseas. Keppel Telecommunications & Transportation is focussed on growing its logistics footprint in its key markets, such as China, and expanding its data centre business.
The series of property market cooling measures rolled out in Singapore and China have started to take effect. In Singapore, private home price growth slowed in the first quarter. However, we expect demand in the mid- to luxury homes segment in Singapore to remain stable. In China, transaction volumes have dropped although prices are still holding up for now. As the effects of the measures filter through the economy, and prices soften in the months ahead, we may see further adjustments in official policy. For the first quarter, our homes in both Singapore and China have continued to see steady sales, indicating that the fundamentals of demand from genuine homebuyers remain sound, especially in China's second and third tier cities. There will be opportunities to acquire quality sites at good prices and capture value from the growing aspirations of Asia's growing middle class to own their own homes. We remain positive on the long term prospects of countries such as China, Vietnam and Indonesia that have continued to show growth, and will focus on developing quality homes in these markets.
With Asia's growth expected to remain reasonably healthy, the office market is likely to stay firm, auguring well for Keppel Land and K-REIT Asia's strategy to grow their portfolios.
The Sino-Singapore Tianjin Eco-City is making steady progress. The project continues to attract partners who are keen to leverage the Eco-City to testbed and showcase their eco-solutions as well as to tap on the dynamic growth of the Tianjin Binhai New Area. A few days ago, we broke ground on our mixed-use development in the Eco-City which includes three office towers, retail premises and serviced apartments. Our eco-homes in Seasons Park launched in October last year have also continued to do well. Meanwhile, KIE has established a joint venture with Chinese partners with the objective to pursue to build, own and operate a water reclamation plant in the Eco-City. The proposed plant will serve the entire Eco-City, providing treated water of quality higher than China's required standards which can be used for a range of non-potable functions.
Strategic Focus for Growth
The Group has started 2011 on a solid footing. We will continue to deliver value to our customers by seeking gains in both innovation and productivity from each project and each employee. To maximise Group synergy, we will continue to grow our sustainable development business platform through enhanced cross-business unit collaboration. In each of our key businesses, we will seek opportunities in adjacencies to grow and integrate along the value chain. To support our business growth strategy, we will spare no effort in attracting, retaining and developing talent to ensure that we have the best people in the right positions. We will build on the good performance of the first quarter to sustain delivering value to our shareholders.