PSE Circular for Brokers No. 231-98

February 27, 1998 PSE CIRCULAR FOR BROKERS NO. 231-98 PRESS RELEASE REGIONAL CRISIS AFFECTS CEBU SHIPYARD The deregulation of the domestic shipping and air industries and the sharp depreciation of the Peso affected local shipowners and thus Cebu Shipyard's performance for 1997. As shipowners took drastic cost cutting measures, the value of repairs suffered in the second half of the year. cdlex Consequently, Cebu Shipyard's revenue dropped by 10% to P307 million in 1997. Operating profit was reduced from P45.6 million to P37.9 million. Contributions from associates, however, improved by 56% to P10.5 million. Net profit after tax was P52 million compared to P63.4 million in the previous year. Keppel Cebu achieved a significant milestone when it became the first shipyard in the Philippines to be awarded the prestigious ISO 9002 quality accreditation in April 1997 by the American Bureau of Shipping. The company will continue its emphasis on human resources to develop an effective and efficient workforce. This will be complemented by the acquisition of new equipment and machinery. A new machine shop is being constructed and when completed towards the third quarter of the year, will be the biggest and most comprehensive in the Visayas and Mindanao regions. KMP Engineering, Inc. our steel fabrication unit, had a busy and profitable year. Projects delivered in 1997 included casing pipes and other structures for the second Mactan-Mandaue Bridge, a pre-heater tower for Alsons Cement in Iligan, a structure for an LNG tank for IHI Chita of Japan, petrochemical plant structure in Batangas and roof structures for a factory building and Marriot Hotel. Our construction unit, Opon-KE Construction and Development Inc. completed the temporary jetty for the second Mactan-Mandaue Bridge, a wharf and warehouse for General Milling Corporation, a passenger barge mooring facility and renovation works for Keppel Monte Bank branches. Bookings for the dock and slipways remain steady. The value of domestic repairs, however, is expected to remain low because of the expected agricultural yields and subsequently inter-island trade. However, price competitiveness in the international shiprepair market will be enhanced by the cheaper Peso. The company expects the coming year to be very competitive amongst shipyards, especially for the domestic market. Barring any unforeseen circumstances, the performance for 1998 is expected to remain steady.