Mideast earnings for UMW next year

PETALING JAYA: UMW Holdings Bhd expects its maiden acquisition of an onshore oil rig company in Oman to start contributing to earnings by the first half of next year, said president and chief executive officer Datuk Abdul Halim Harun.

“The company, Arabian Drilling Services LLC, is currently manufacturing two land rigs worth US$25mil each in the United States,” he told StarBiz. “They are almost ready now and we are talking to a few parties to secure contracts for the rigs. We hope to see something happening in the coming months.”

Halim said UMW’s recent acquisition of a 65% stake in Arabian Drilling Services via subsidiary UMW Sher (L) Ltd for RM10.5mil was the start of its expansion into the Mideast region.

UMW Sher has already made significant inroads into India since 2008 and currently owns three onshore rigs – Sher 1, Sher 2 and Sher 3 – all now operating in north-east India.

“This is part of our diversification plan to expand into other markets. We have stationed a man in Dubai to look for investments and this is one of them.

“We are starting with the onshore oil rig business as we have the experience via our business in India. Our oil and gas business in the Middle East so far has just been in the trading of pipes and other products,” Halim said.

According to Halim, the group also plans to set up a pipe repair and threading plant in Oman – such as the plants that the group has in Tianjin and Labuan – with a Middle Eastern joint venture partner.

“We are in the midst of negotiations and looking for land to set up the plant. UMW aims to have a controlling stake in the plant,” he said, adding that the hope was for the plans to materialise within a year.

There is also a plan to set up an oil and gas pipe manufacturing plant in the Mideast region if market studies show that it is feasible.

An analyst with MIDF Research sees the acquisition as a stepping stone for UMW to enter the Middle East market.

“The expansion is good for them. It is a long-term strategy as earnings contribution may only start from the year ending Dec 31, 2010 onwards.

“We expect more activities from UMW’s oil and gas arm going forward as the division is the group’s future earnings driver,” the analyst said.

For the first quarter ended March 31, the group recorded a 53.5% fall in net profit to RM65.9mil versus the first quarter of 2008, while revenue fell 21.3% to RM2.35bil in the same period.

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