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Wed 14 Apr 2010 01:10 PM

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Shipbuilder Drydocks SE Asia eyes flat sales

Ship and rig builder's orderbook stood at $1bn, which is little changed from a year ago.

Ship and rig builder Drydocks World is aiming to generate $800 million worth of sales from Southeast Asia this year, steady from 2009, signalling the offshore marine industry remains cautious after the financial crisis. Oil rig and shipbuilders such as Singapore's Keppel Corp were hit last year by an absence of significant orders as plunging oil prices left major oil and gas explorers delaying or cancelling orders placed during previous boom years.

Denis Welch, chief executive for Drydocks World Southeast Asia, said the firm's orderbook stood at $1 billion, which is little changed from a year ago. He said limited bank financing after the financial crisis was a factor holding back new orders.

"If you look at the world's rigs and supply vessels, over half of them are over 20 years old and there has to be a replacement programme that comes into effect," Welch told Reuters in an interview on Wednesday.

"(Among) things that are holding us back now is bank financing," he said, from his office at Singapore's harbourfront.

He said the company, the shipyard business of conglomerate Dubai World, is close to securing two deals with a total value of more than $150 million later this month, after signing a total of $200 million in contracts during the first quarter of this year. The Southeast Asian unit gets contracts from other regions such as the Middle East and Europe.

But an overhang of ships, after heavy orders placed during the boom years before the financial crisis, and uncertainty about the sustainability of the economic recovery is limiting capital expenditure from the shipping and energy industries.

"While a recovery is clearly underway and with market expectations for new orders, we would caution against overexuberance as drilling contractors are likely to take a more measured approach," said Rohan Suppiah, analyst at Kim Eng Research.

"While Singapore shipyards are optimistic on new orders on firmer oil prices, enquiries remain muted," Suppiah said.

Drydocks World has one yard in Singapore and three yards located in the nearby Indonesian island of Batam, employing 27,000 workers. It competes in the region with the world's top rigbuilders Keppel and Sembcorp Marine.

Dubai's government in March unveiled a $9.5 billion support plan for its flagship conglomerate Dubai World. Dubai World has said that Drydocks is not included in the restructuring programme. Welch said the Southeast Asian operation had not been affected by the debt troubles of its parent firm. (Reuters)

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