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Keppel Corp posts 15% fall in Q3 earnings but O&M turns profitable

KEPPEL Corporation on Thursday posted a 15 per cent drop in third-quarter earnings at S$225.7 million, mainly due to lower contributions from its investments and property divisions, offsetting stronger performance in its infrastructure and offshore & marine (O&M) divisions.

Its O&M division registered a net profit of S$2 million for the three months ended September 2018, bucking three consecutive quarters of losses.

Group revenue of S$1.3 billion for the third quarter was 20 per cent lower than the S$1.62 billion registered in the corresponding period a year ago. Higher revenue recognition from ongoing O&M projects and increased power and gas sales were offset by lower contributions from property trading, asset management, as well as the absence of the sale of investments.

Earnings per share declined 15 per cent to 12.4 Singapore cents, the company announced in a webcast briefing after markets closed.

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On the O&M division reversing its losses, Keppel Corp CEO Loh Chin Hua said: "We are very pleased that we have this quarter of break-even. The team is working very hard to make sure this is sustainable. The hard work in reducing overheads is paying off. We are starting to see more enquiries. We are cautiously optimistic."

The beleaguered division registered a net profit of S$2 million and a 9 per cent increase in top-line performance at S$416 million, on the back of higher revenue recognition from ongoing projects as well as higher operating profit.

Keppel's infrastructure division achieved a net profit of S$55 million or 38 per cent growth, and a revenue of S$674 million or 8 per cent higher. This was the result of increased sales in the power and gas businesses, though partly mitigated by lower progressive revenue recognition from Keppel Marina East Desalination Plant project.

In contrast, the other two divisions turned in less sterling results. Its investments division saw an 85 per cent plunge in net profit at S$8 million due mainly to the absence of sale of equity investments compared to the same period last year, as well as lower revenue from the asset management business. Revenue from this division came in at S$25 million or 62 per cent less.

As for the property division, net profit of S$161 million was 6 per cent lower while revenue dropped 67 per cent to S$180 million. The decline in contributions was due to the absence of revenue compared to the same quarter last year from some projects, including The Glades, which were all sold by December 2017.

For the first nine months of 2018, Keppel Corp achieved a net profit of S$809.3 million, 18 per cent higher than the S$688 million recorded in the same period in 2017, buoyed by stronger contributions from the property and infrastructure divisions, which more than offset losses incurred by the O&M and investments divisions.

Earnings per share for this period increased 18 per cent to 44.6 Singapore cents consequently.

However, its 9MFY18 revenue of S$4.29 billion was 3 per cent lower compared with S$4.42 billion in the same period a year ago. Revenue recognition from the rigs sold to Borr Drilling, coupled with increased power and gas sales, were offset by lower contributions from property trading and asset management, a decrease in the O&M division's work volume, as well as the absence of the sale of investments.

Mr Loh started the results briefing on Thursday saying that "this has been an eventful quarter for Keppel", referring to the several initiatives that have been launched, including making the preconditional voluntary general offer for M1, together with Singapore Press Holdings, last month.

He shared that "M1 has been a good investment for Keppel". The conglomerate has invested S$170 million over the years, and in return received S$737 million of dividends and proceeds from the sale of some shares.

"We believe that with the necessary transformation, it (M1) can continue to be a valuable asset for the group," Mr Loh added.

Keppel Corp separately announced that Keppel Seghers has secured a contract worth over 70 million euros (S$111 million) to supply technology solutions to Australia's first Waste-to-Energy plant which is located in Kwinana. The facility will feature Keppel Seghers' air-cooled grate and vertical boiler, which are designed to achieve efficient energy recovery and operational reliability.

Keppel Corp shares closed two Singapore cents higher at S$6.76 on Thursday, before the results were announced.