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Keppel Corp profits rise but orderbook falls

Keppel Corp profits rise but orderbook falls

Singapore: Keppel Corp, the world's largest offshore oil rig builder, posted on Thursday a 6% rise in second quarter net profit but its orderbook slid as it faces a cyclical industry downturn, writes Reuters. Keppel did not receive any orders for new equipment during the quarter and its orderbook dropped to S$7.7bn (US$5.35bn) from S$9.5bn at the end of the first quarter, though it has a buffer as deliveries are up to 2012.

"Of course we are very concerned, we are in the cyclical downturn of the offshore and marine industry.... we are cautiously optimistic that we will get some," CEO Choo Chiau Beng told a results briefing. "We do not foresee further cancellations on our orderbooks." The outlook for its property arm has improved amid soaring home sales in Singapore, China and Vietnam, the firm said in its results statement.

For the three months ended June 30, the conglomerate, 21% owned by Singapore state investor Temasek, earned S$317.3m, up from S$299.3m in the year-ago period. Revenue rose 21% to S$3.2bn. Keppel reported an exceptional gain of S$422.2m for the quarter mainly due to the sale of its stake in Singapore Petroleum Co, which boosted net profit for the period to S$790.3m from S$345.3m a year earlier.

Societe Generale Asset Management (SGAM) said during a briefing on Wednesday that most oil majors were profitable when oil was in the $25-30 a barrel range. The current price of $60-70/bbl supported capital expenditure by industry players that would benefit the likes of Keppel. Marco Wong, SGAM's chief investment officer for Asia ex-Japan, said, however, that he preferred to invest in Asian firms that relied more on domestic demand given continued uncertainty in the West.

Keppel and rival Sembcorp Marine the world's number two rigbuilder, benefited from a jump in oil exploration in recent years as crude prices CLc1 soared to record highs. But oil prices slid from near a record $150 a barrel in 2008 to less than $50 by the end of the first quarter of 2009, before rebounding to current levels of around $65. "The fundamentals of the industry remain resilient in the longer term. Exploration and production spending is expected to increase to meet the growth in demand for energy and offset declines in crude oil reserves," Keppel said in its earnings statement.  [24/07/09]