Page 22: of Maritime Reporter Magazine (March 2000)

Ship Repair & Conversion

High Times Again in Singapore?

Singapore, once revered for its seem- forces which have slowed the area's Europe: rising land and labor costs, cor- ingly insurmountable edge in the ship break-neck pace of expansion and dom- porate consolidations and a seemingly repair and conversion business, has fall- inance are not at all unfamiliar to ship- endless stream of cut-rate competitors, en on harder times in recent years. The builders and repairers in the U.S. and According to recent financial reports

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Singapore's two ship repair yards, Kep- pel Hitachi Zosen Ltd. and SembCorp

Marine Ltd., have found the balance to reign supreme once again. The compa- nies were expected to report modest profit growth after almost two years of restructuring and consolidation.

Keppel Hitachi Zosen was expected to turn in profit of about $19.4 million for 1999 after a $38.3 million loss for the nine months ended December 1998, analysts said. SembCorp Marine was expected to post a 10 percent rise in earnings of between $46.03 million and $47.2 million against 1998 profit of $42.3 million. Squeezed by rising land and wage costs. Singapore's shipyard industry underwent a consolidation in 1997 and 1998 that saw the city state's main players reduced to two from four.

SembCorp Marine was formed by a merger between Jurong and Sembawang

Shipyards in mid-1997 while Keppel

Shipyard and Hitachi Zosen (Singapore) completed their merger in 1999.

Both yards have made some progress in reducing costs through retrenchments undertaken in November, when Semb-

Corp Marine let go of 249 employees and Keppel Hitachi released 132. But analysts see some rough waters ahead, as cheaper shipyards in the Middle East and China continue to expand capacity and steal business via lower prices. "Going forward things are looking a bit tough. It's an industry problem," a

Vickers Ballas analyst was quoted as saying.

Sembcorp Marine Rated Buy

Investors looking to sink their money into the shipyard industry would fare better with SembCorp Marine, accord- ing to analysts. SembCorp Marine's val- uation was cheaper, trading around 10 or 12 times earnings versus Keppel

Hitachi Zosen's 20 times.

SembCorp Marine's plan to move more of its shipyard operations offshore was also favored and the group's restructuring was expected to reap $8.8 million in savings this year and $17.7 million annually down the road. It is still critical for the yards to cut costs in order to stay competitive, and will include moves such as moving the more

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