Keppel's Q3 profit falls 30% in absence of divestment gains

Singapore

KEPPEL Corp's third quarter net profit fell 30 per cent to S$159 million from a restated S$227 million a year ago in the absence of a divestment gain and higher net interest expense that was partly offset by higher contributions from associated companies and property trading projects in China and Singapore.

Profit at its property division for Q3 2018 was boosted by a one-off gain from the divestment of Beijing Aether. Revenue for the three months to September jumped 60 per cent to S$2.07 billion with higher recognition from offshore & marine, property and infrastructure projects, as well as increased sales in the power and gas business and from the consolidation of M1's results.

The offshore & marine (O&M) business posted a 52 per cent jump in revenue to S$632 million on higher revenue recognition from ongoing projects. New contracts secured by this division year-to-date stood at S$1.9 billion, with close to 60 per cent of the new orders for LNG and renewables-related projects.

"The projects in this division are not driven on a quarterly basis...although we have challenges in certain segments of the oil and gas business, we continue to see opportunities in renewables and gas solutions and will continue to chase and improve the quality of our order book," said Keppel O&M chief executive Chris Ong, responding to a query during a live webcast on whether new orders in the segment were slowing amid a weakening global economy.

Keppel chief executive Loh Chin Hua said the recent settlement agreement reached by Keppel O&M with Sete Brasil "brings closure" to the outstanding contracts for the construction of the six rigs.

On whether there would be further provisions or possible write-backs as a result of the agreement, Keppel chief financial officer Chan Hon Chew said the S$476 million cumulative provisions taken by Keppel so far for the six rigs were "still sufficient" and "reasonable" and it was premature to indicate if there may be writebacks, as the matter was still under discussion.

Revenue from Keppel's property division more than doubled to S$385 million, owing to higher revenue from property trading projects in China, Vietnam and Singapore with Mr Loh pointing out that Ho Chi Minh City is a promising market with rising affluence and urbanisation driving strong demand for quality homes and commercial projects.

Revenue from infrastructure business rose 10 per cent to S$742 million on increased sales in the power and gas business and progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project.

Revenue from investments surged S$283 million to S$308 million owing mainly to the consolidation of M1.

Mr Loh said the group's data centre business has become an important growth area. "The injection of Keppel DC Singapore 4 into Keppel DC Reit reflects Keppel's business model, and our ability to create value for different stakeholders by hunting as a pack.

"Over the past five years (2014-2018), the Keppel Group achieved earnings of about S$430 million from the data centre business, not including the approximately S$270 million premium over the carrying value of Keppel's stake in Keppel DC Reit."

Earnings per share for the three months to September fell to 8.8 Singapore cents from 12.5 Singapore cents. For the nine-month period, net profit fell 37 per cent to S$515 million due to lower gains from en bloc sales and divestments. Revenue rose 26 per cent to S$5.4 billion.

Keppel shares were down 2 Singapore cents or 0.3 per cent to finish at S$5.96 on Thursday.