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Keppel logs 15% fall in Q3 earnings from weaker investments, property divisions

This is despite stronger performances turned in by its infrastructure and O&M divisions

Singapore

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

Its revenue of S$1.3 billion for the quarter was also 20 per cent lower, compared to the S$1.62 billion registered in the corresponding period a year ago.

Despite its stronger performance from ongoing O&M projects and increased power and gas sales, lower contributions from property trading and asset management were a drag on the mainboard-listed conglomerate's revenue. There was also an absence of the sale of investments in the three months ended September.

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Earnings per share also declined 15 per cent year-on-year from 14.6 to 12.4 Singapore cents.

Notably, its O&M business turned a profit in a challenging operating environment after three consecutive quarters of losses. 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 Corp chief executive 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."

Keppel O&M has undergone right-sizing over the past two years, resulting in reduction in overheads, which helped to lift operating profit.

As at Sept 30, its net orderbook was S$4.4 billion, compared to S$3.9 billion as at last December, excluding the projects for Sete Brasil.

Its infrastructure division achieved a net profit of S$55 million, a 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. In its investments division, there was 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 year-ago period, 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 from some projects, including The Glades, which was sold out by December 2017.

On the government's latest move to cut the maximum number of units allowed in new private flat and condo developments, Mr Loh said that Keppel would factor this into its considerations when looking at land sites in Singapore.

He also revealed that of the 50,000 units in Keppel's residential land bank, 1,168 are in Singapore. The remaining units are located overseas.

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 than the 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 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."

Separately, Keppel Corp 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 located in Kwinana in Western Australia.

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.