Keppel's net profit down 20.9% to S$160.5m on absence of divestment gain

THE net profit of mainboard-listed Keppel Corp fell 20.9 per cent to S$160.5 million for the first quarter ended March, mainly on the absence of the divestment of its 70 per cent stake in Vietnam's Dong Nai Waterfront City a year ago.

This translates to an earnings per share of 8.8 cents in Q1, compared to 11.2 cents a year ago.

But its revenue was up 21.3 per cent to S$1.86 billion for the quarter, mainly a result of higher revenues from offshore and marine projects, property trading projects in Singapore, the power and gas business and the consolidation of telco M1.

The topline growth was partly dampened by lower contributions from property trading projects in China, environmental-engineering projects and asset management.

Keppel's offshore and marine (O&M) segment posted a net profit of S$3 million for the quarter, halved from a year ago, due to the share of losses from associated companies. The division's operating profit stood at S$28 million.

During the circuit breaker, Keppel O&M's yards continue to provide services in vessel repair, maintenance and overhaul, but with reduced manpower and various precautionary measures in place. Most of the company's overseas yards are also operational with varying levels of restrictions, the company said.

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Keppel O&M remains resilient amid the oil price shock due to its diversification from oil-related projects, the company said. Renewables and gas-related solutions accounted for more than 70 per cent of the division's S$4 billion net orderbook as of the end of March.

Meanwhile, the company's property division's net profit plunged 73 per cent to S$35 million for Q1, due mainly to the absence of the Dong Nai gain as well as a tax writeback last year. In Q1, Keppel Land sold 450 homes, about 15 per cent more than a year ago. China contributed over 70 per cent of sales volume.

The Singapore market slowed down with the closure of showrooms during the circuit breaker and more cautious sentiment, but the Vietnam market remained "relatively resilient", Keppel noted.

Its infrastructure division posted a net profit of S$174 million for Q1 2020, more than 10 times that of the S$16 million net profit the year before, due to a mark-to-market gain of S$131 milion from reclassifying Keppel Infrastructure Trust from an associated company to an investment.

Excluding the reclassification, Keppel Infrastructure's earnings doubled year on year with higher contributions from energy infrastructure. Demand for infrastructure and connectivity solutions remain resilient despite Covid-19, Keppel said.

Given the work-from-home situation, Keppel Data Centres has received enquiries from customers on new data centre capacity; it is also exploring the development of a Floating Data Centre Park at the Loyang Offshore Supply Base in Singapore.

Keppel's investments division fell into the red in Q1, with a net loss of S$52 million compared to net profit of S$49 million in Q1 last year. This was due to the absence of re-measurement gains from previously held interests in M1 and mark-to-market losses on some investments.

Keppel's chief executive Loh Chin Hua said: "While Keppel is not directly involved in the sectors most severely affected by Covid-19, our businesses have inevitably been affected by the fall in global economic activity, lockdowns in various countries, disruptions to the workforce and supply chains, as well as the sharp drop in oil prices."

Keppel has the necessary credit lines to operate, he said, adding: "Nevertheless, given the tightening liquidity environment, we are watching our cashflow and gearing carefully, and will manage costs across the group."

Net gearing crept up to 0.88 times as of end-March, compared to 0.85 times a year ago, due to acquisitions and investments during the quarter, Keppel said. But with lower working capital requirement, its free cash inflow was S$37 million in Q1 2020, reversing the S$534 million outflow a year ago.

Shares of Keppel closed at S$5.97 on Wednesday, down S$0.06 or 1 per cent, before the release of the results.