Keppel's Profit Weighed Down by Sluggish Offshore Business

Keppel Offshore and Marine shipbuilding

Earnings per share expanded to 14.3 Singapore cents from 11.6 Singapore cents in the preceding year. The conglomerate and its rival Sembcorp Marine Ltd have been suffering from an oversupply of offshore oil drilling rigs, with customers delaying contracts and refraining from placing orders while oil prices linger at about half their 2014 peak. In 2016, Keppel posted its smallest annual profit in a decade.

Chief executive Loh Chin Hua told a Web-briefing that while the unit continued to make a profit at the gross operating level, it was insufficient to cover its fixed costs.

The results were buoyed by a three-fold jump in Keppel Infrastructure's net profit for the quarter to S$30 million.

Group revenue slid 28.4 per cent to $1.25 billion, dragged down by the offshore and marine business, where turnover fell 41 per cent to $483 million. Higher revenues from its infrastructure and investment divisions could not fully offset the losses in its offshore and marine business or its property arm.

Pre-tax earnings of the O&M division slumped by 99 percent to $1 million.

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During the reported period, the company succeeded to reduce workforce by 1,2500 employees (6%), compared to previous quarter.

The "very challenging conditions" of the offshore market has led to Keppel Offshore & Marine (Keppel O&M) posting a net loss for the first quarter ended 31 March 2017.

Since the start of 2015, the division has slashed global direct workforce by close to 18,000 or about 49%. The pre-tax earning of the Offshore and Marine Division slumped by 99% to 1 million Dollars, recording a net order book of 2.5 billion USD, excluding orders from one of its biggest customers, rig leaser Sete Brasil Participacoes SA, which filed for bankruptcy protection past year amid a corruption scandal. Over the past two weeks, at least 50 cities have implemented similar measures.

"Our revised fair value estimate of S$7.36, down slightly from S$7.40 after updating the values of Keppel's listed entities, implies a P/B of 1.1x" says analyst Low Pei Han in a Friday report. Off-topic, inappropriate or insulting comments will be removed.

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