Hiap Seng first half profit down 34.6% to S$10.2mln

The group still has strong balance sheet with cash and cash equivalents of S$52.9mln despite incurring higher cost in executing projects.

Hiap Seng Engineering Ltd (“Hiap Seng”), a specialist integrated engineering group for the global oil-and-gas, petrochemical and pharmaceutical industries, on Wednesday reported a net profit of S$10.2 million on revenue of S$124.3 million for the first half ended September 30, 2010 (“1HFY2011”).

The Group’s revenue for 1HFY2011 decreased by 1.8% from S$126.6 million to S$124.3 million in 1HFY2010 and net profit attributable to shareholders decreased by 34.6% from S$15.5 million to S$10.2 million mainly due to lower gross profit margin resulting from higher cost in executing some projects, as mentioned in a Hiap Seng report.

Said Mr Frankie Tan, Chairman and CEO of Hiap Seng: “The oil-and-gas, petrochemical and pharmaceutical industries which we serve still remain positive. We will continue to control costs and improve productivity.”
As at November 10, 2010, the Group's order book stands at S$132.0 million.

Review of 2QFY2011 Performance
Quarter-to-quarter, the Group recorded a 19.3% decrease in revenue to S$56.4 million in 2QFY2011 as compared to S$69.9 million in 2QFY2010. Gross profit margin also decreased to 11.2% from 22.3% in the previous corresponding period. These were due to lower percentage of completion in a number of projects and higher cost in executing some projects respectively in 2QFY2011.

The foreign exchange loss of S$1.5 million which included unrealised loss of S$1.2 million for 2QFY2011 as compared to S$0.4 million loss for 2QFY2010 was primarily due to the weakening of the US Dollar against the Sing Dollar during the period under review.

The Group’s net profit attributable to shareholders for 2QFY2011 decreased by 73.5% from S$8.0 million to S$2.1 million in view of the factors mentioned above. As at September 30, 2010, the Group’s cash and cash equivalents stood at S$52.9 million, as compared to S$17.7 million as at March 31, 2010.

To reward its shareholders, Hiap Seng has declared an interim, one-tier tax-exempt dividend of 1.0 cent per ordinary share, which is expected to be paid on January 18, 2011.

Outlook
The outlook for the oil-and-gas, petrochemical and pharmaceutical industries that the Group serves still remains positive. However, in view of keen competition, the Directors of the Company are cautiously optimistic about the Group’s performance for the current financial year ending March 31, 2011.

The Group will continue to control costs and improve productivity and with a strong financial position and established track record, it will continue to explore new business opportunities to enhance shareholder value.