Singapore’s Keppel Corp posted its first year-on-year rise in quarterly profits since early 2015, helped by improved earnings from infrastructure and investments, but its offshore business continues to face “very challenging conditions”.
The conglomerate and its smaller cross-town rival Sembcorp Marine have been hit by an oversupply of offshore oil drilling rigs, with customers delaying contracts and orders while oil prices hover at about half their 2014 peak. In 2016, Keppel posted its smallest annual profit in a decade.
“It will take some time before the industry fully recovers,” Chief Executive Loh Chin Hua said on Thursday.
Keppel, in which Singapore state investor Temasek is the biggest shareholder, reported a net profit of S$260 million ($186.17 million) for the quarter ended in March, versus S$211 million a year ago – snapping seven straight quarters of year-on-year declines.
The results were buoyed by a three-fold jump in Keppel Infrastructure’s net profit for the quarter to S$30 million.
But total revenue at Keppel – whose businesses also include property development – fell 28.4 percent to S$1.25 billion.
Revenue from the Offshore & Marine (O&M) Division, which builds offshore drilling rigs and support vessels, decreased by S$335 million to S$483 million due to a decline in work volumes.
Pre-tax earnings of the O&M division slumped by 99 percent to $1 million. The division recorded a net order book of S$3.5 billion, excluding orders from one of its biggest customers, rig leaser Sete Brasil Participacoes SA, which filed for bankruptcy protection last year amid a corruption scandal.
In the first quarter, Keppel O&M further reduced its global direct workforce by about 1,250 people, or 6 percent, compared to the previous quarter, through natural attrition, early termination of contracts and retrenchments.
The company had reduced its direct workforce in the O&M segment by about 10,600 people, or 35 percent, last year.
Keppel’s property division posted a 3 percent drop in first-quarter net profit.
The CEO said Keppel’s home sales in China slowed slightly in part due to Beijing’s property market cooling measures and also because fewer new homes were launched in the first quarter.
Beijing announced property purchase restrictions on March 17 to curb speculation. Over the past two weeks, at least 50 cities have implemented similar measures.
Shares of the company, valued by the market at about S$12 billion, closed down 1.4 percent on Thursday, while the broader market ended 0.4 percent higher.