On behalf of my fellow Directors, I am pleased to present to you the performance of the Group for the financial year ended 31 December 2010.
We had a busy year as we secured another significant project - a US$250 million contract to build a petroleum storage facility with capacity of 1.1 million m3 in Fujairah, United Arab Emirates, which is a first for Rotary.
This win came even as we progressed on track with our mega project to build a US$745 million refinery tank farm at Jubail, Saudi Arabia, an Engineering, Procurement and Construction (EPC) contract awarded by Saudi Aramco Total Refining and Petrochemical Company (SATORP) in 2009.
2010 has indeed been an exhilarating and exciting year for Rotary. In FY2010, we achieved record profit after tax attributable to parent of S$63.7 million, up 18% from S$54.2 million a year ago. We also registered a new high of S$704.2 million in revenue, an increase of 28% from S$551.9 million previously. Earnings per share for the year was 11.2 cents against 9.6 cents a year ago.
The Board of Directors has recommended a final dividend of 3.8 cents per share; an interim dividend of 1.0 cent per share has been paid in September 2010, bringing total dividends for FY2010 to 4.8 cents per share.
We continued to maintain a strong financial position as the year drew to a close, with total assets of S$739.1 million, net tangible assets of S$297.6 million, net working capital of S$214.1 million and cash and cash equivalents of S$137.0 million.
As a leading provider of engineering, procurement, construction and maintenance services specialising in the oil & gas and petrochemical industries, we continued to steer a growth trajectory, engaging clients, staff members and markets in a manner that would see the company powering ahead unrelentingly.
Broadening and Deepening
Executing mega projects necessarily involves a broadening and deepening of our skills and experience, as well as a change in mindset and to some extent, working styles. We have had to move outside our comfort zone on many fronts. Presented with a new set of parameters, we have to move quickly to scale a new learning curve.
Our Human Resource Department, for example, has had to contend with mobilising thousands of workers, not to Jurong Island but to Saudi Arabia. Our engineers and project managers have had to deal with an entirely different set of climatic factors and even our Finance department has had to adapt to different invoicing and payment protocols.
For us, failure is not an option. Indeed, we are acutely aware of our need to perform. Thus, we spare no effort to ensure that we handle this project with the same level of confidence and skill that we would on all our projects, ultimately delivering a service that is timely, of quality, and that would satisfy our clients.
I am pleased to say that, together, we are overcoming the complexities of working in a different culture, a different time zone and coping with different personalities and a different national psyche. This learning journey has enabled us to garner new insights and become more adept technically. We have also adapted to working in desert temperatures, and adopted some professional best practices that transcend cultures and nationalities. That is to say, we have all grown – personally, as well as corporately.
Middle-East Projects Update
The Group is making good progress on the SATORP site as manpower on the ground swells to more than 3,300. Rotary’s scope of work includes the full range of engineering, procurement, construction activities involving 62 Atmospheric Storage Tanks and 8 Bullet Tanks which are horizontal cylindrical longish tanks mounded with earth. When completed, the 400,000 barrels per day export refinery will be one of the most advanced in the world and will refine crude oil into finished products for local and international markets.
The US$250 million Fujairah Oil Terminal project will require Rotary to build a petroleum storage facility with capacity of 1.1 million m3. Awarded by Singapore-based oil trader Concord Energy Pte Ltd, engineering works are currently in full swing.
Geographical Growth - Moving into Different Markets
Going overseas is not new to Rotary. We have maintained a regional presence for many years, with numerous projects in Malaysia, Indonesia, Thailand and other parts of Asia Pacific. Going forward, we envisage that revenue contributions from overseas will grow and thus markets outside of Singapore will take on more importance.
As of end-2010, our order book stood at a healthy S$0.9 billion with projects targeted to be completed and delivered progressively, up to end-2012. Of this, more than 92% of the contracts originated from overseas.
Middle East Initiatives
With our two projects in Saudi Arabia and the United Arab Emirates, we continue to build our reputation and track record in a region that we believe continues to hold long term promise. We are actively participating in bids and tenders as Saudi Arabia rolls out its planned expansion of oil and gas infrastructure, which will transform the Kingdom from a source to a significant global processing hub for the petrochemical industry. We will capitalise on our presence to secure more projects and we are confident of our ability to do so in the coming years mainly in the Gulf Cooperation Council (GCC) countries.
Asia
We continue to strengthen our grip on the Asian market, breaking into new areas and where possible, aligning our interests as partners with our clients so that we can scale the value chain gradually. Our ties with our customers and associates in Malaysia and Indonesia remain resilient and this has enabled us to develop and progress prospects directly with our clients.
Further Afield
Our interest and foray into new areas and new markets are helping us to power ahead on the growth path. Europe beckons. Although it is a mature market, there are indications of a trend towards regeneration of existing facilities which could open opportunities for Rotary.
We are in direct negotiations with a number of parties for various projects in several markets. At the same time, Rotary is exploring opportunities for global strategic partnerships, and we are very excited about the future as we look to extend our geographic reach further.
Human Resources
As we continue to grow our business, our internal support infrastructure too has to be bolstered.
Human capital has always provided Rotary with a sharp competitive edge. Having our own 7,000-strong trained workforce places Rotary in control and enable us to develop better cost and quality control on each project. Managing this workforce demands that we adopt progressive and innovative strategies and initiatives to attract and retain talent at all levels.
We continue to hone our competitive edge by constantly developing our Global Work Force (GWF) as we grow our own crop of engineers and craftsmen who are attuned to the Rotary brand of service delivery. To date, our four Overseas Training and Test Centres (OTTC) in China and India have trained more than 1,000 personnel. As we prepare to take on more and bigger projects, this scheme will take on greater importance. Our plans in Saudi Arabia to support Saudization plans are currently ongoing and we are looking to cooperate with local service providers to provide training to our workforce.
Health, Safety and Environment Matters
Our commitment to providing a safe and risk-free working environment for our people remains unwavering. We are glad to note an improvement in our work safety record. Our Total Recordable Incident Rate (TRIR) in 2010 was 0.65, down from 1.14 in 2009. TRIR is a measure of the rate of recordable workplace injuries that require treatment beyond first aid.
Over the year, our efforts to educate our staff and reinforce principles relating to best Health, Safety & Environment (HSE) practices continued. A new initiative we undertook was to launch HSE leadership training that targeted, for the first time, those at the supervisory level. Feedback and response were positive. We also continued to hold our popular annual Safety Carnival, started in 2008.
Rotary Globalisation Plan
The Rotary Globalisation Plan, a strategic programme first launched in 2008 to position Rotary for global business expansion, continued in 2010 with our major independent Business Units’ operating environments being standardised, automated and integrated with SAP, Enterprise Resource Planning (ERP) systems, as well as the SmartPlant suite of engineering systems.
OTCQX Quotation
On February 28 this year, Rotary obtained a quotation on OTCQX International, an efficient platform for non-US listed companies to access the US markets. Its American Depository Receipts are now available for trading in the United States on OTCQX International under the symbol “ROTGY”. Each ADR represents 20 ordinary shares listed on the Singapore Exchange under the symbol “R07”. The quotation of Rotary’s ADRs on the OTCQX market tier will be non-dilutive for existing shareholders as no new or additional shares will be issued.
Outlook
The global economy is slowly improving. Overall, the outlook for our industry is bright, as concerns over a double-dip recession recede. The strong demand for energy underpinning long-term prospects for oil, gas and petrochemical industries should continue to fuel business opportunities for us. We envisage business activity levels to remain high as we stay busy, going forward.
We are confident that our strong fundamentals and delivery of our projects to our clients will power our business growth.
A Note of Thanks
On behalf of the Board of Directors, I would like to thank our customers, business associates and suppliers for their unstinting support, encouragement and assistance.
To the Management and Staff of the Rotary Group of Companies, the Board and I wish to extend our thanks and appreciation for their commitment and dedication.
Finally, thanks are due to all our Shareholders who continue to believe in us and to support us.
Mr. Chia Kim Piow
Chairman & Managing Director