Kepphil Shipyard Maintains Operating Profit

February 27, 1998 PSE CIRCULAR FOR BROKERS NO. 232-98 PRESS RELEASE KEPPHIL SHIPYARD MAINTAINS OPERATING PROFIT 1997 was a difficult yew for Kepphil Shipyard, with revenue declining 7% to P482 million. Operating profit, however, was maintained at P83 million. A lower pre-tax profit of P99 million was recorded due mainly to a decline in contributions from associate Subic Shipyard, and a drop in non-operating income. Non-operating income in 1996 included a gain from the sale of a floating dock. cdlex Revenue at Kepphil Shipyard and Subic Shipyard was affected by work slowdown during negotiations of new collective bargaining agreements. Demand for shiprepair from domestic shipowners also declined during the second half of the year due to the effect of the regional currency crisis and high interest rates. Revenue of domestic shipping companies was affected by the entry of new tonnage in the local fleet due to the deregulation of the shipping industry and competition for passengers by new domestic airlines. As a result, many domestic shipowners have trimmed their budgets or deferred the drydocking of their vessels. The international shiprepair market also remained highly competitive. As a result, Subic Shipyard lower revenue and profit margins. Although the Philippine economy is expected to slow down in 1998 in the wake of the recent Asian currency turmoil, the devaluation of the Peso will significantly enhance the competitiveness of shiprepair services for foreign vessels for Kepphil Shipyard and Subic Shipyard. Kepphil Shipyard's 40,000 dwt drydock currently under construction is expected to be operational by the third quarter of 1998. The drydock will enable the Company to take advantage of the cheaper Peso to attract more foreign wells to the yard. LLpr Barring any unforeseen circumstances, the Company expects to report better results for the current year.