SINGAPORE: Singapore’s Keppel Corp Ltd posted its smallest annual profit in a decade, dented by a lack of orders at its key rig-building business and provisions for impairments, and cautioned that oversupply would continue to drag on the offshore business.
The city-state’s offshore and marine industry has been pummelled as clients cut spending to weather a slide in oil prices, hurting Keppel and cross-town rival Sembcorp Marine and forcing them to cut workforce by thousands.
“While spending by oil majors is expected to increase, we do not envisage a quick recovery for the offshore business, which continues to be under pressure from weak utilisation of the existing operating fleet, coupled with a supply overhang of new builds,” chief executive Loh Chin Hua said at a briefing.
Keppel, in which Singapore state investor Temasek is the biggest shareholder, yesterday reported a net profit of S$784mil for 2016, the lowest since 2006.
This was far short of an average analysts’ estimate of S$895mil, Thomson Reuters data shows.
For the October-December quarter, the firm’s net profit came in at S$143mil, down from S$405mil a year ago. Revenue for the quarter dropped 22% to S$1.94bil.
Excluding provisions for impairment and one-off items, Keppel’s quarterly net profit would have come in at S$300mil, steady versus a year ago.
The company – whose businesses include property development and infrastructure – made provisions for impairment of S$336mil during the year, mainly related to job cuts.
For 2016, Keppel reduced its direct workforce by about 10,600, or 35%, in its offshore and marine segment.
Keppel and Sembcorp have both suffered from an oversupply of offshore oil drilling rigs, with customers delaying existing contracts and staying away from new orders amid weak oil prices that are at about half their 2014 peaks.
To ride out the tough conditions, Keppel said it was cutting yard capacity and that it had mothballed two overseas yards. In Singapore, it is closing three yards.
Despite a slight recovery in global oil prices, offshore rig utilisation remains low at about 50% compared to 70% in 2015, brokerage Maybank Kim Eng said last month. — Reuters