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Latest Earnings From Keppel Corporation Limited: A Mixed Bag

Keppel Corporation Limited (SGX: BN4) is one of the largest listed conglomerates in Singapore. Its businesses span multiple sectors such as offshore & marine, real estate, and infrastructure.

The company’s offshore & marine arm is also one of the largest rig builders in the world and with the drastic drop in oil prices since 2014 (from over US$100 per barrel in mid-2014 to around US$30 today), shares of the company have followed suit, falling by more than half since the start of 2014.

Keppel Corp had announced its full year results for 2015 yesterday evening. So, let’s have a look at them to better understand how the company has performed.

Here are the important financial highlights:

  1. For the whole of 2015, Keppel Corp reported S$10.3 billion in revenue, down 22.5% compared to 2014. For the fourth-quarter of 2015, the conglomerate’s revenue had declined by 36.8% year-on-year to S$2.48 billion.
  2. Net profit attributable to shareholders came in at S$1.525 billion for the whole of 2015, which was 19.1% lower compared to 2014. For the reporting quarter, the profit figure was S$404.8 million, down by 44.2% year-on-year.
  3. A big reason for the profit declines (for both the year and quarter) was the Offshore & Marine business segment. For the year, the segment had suffered a 54% drop in profit, whereas the segment had made a loss of S$61 million in the quarter as compared to a profit of S$287 million seen a year ago.
  4. The Property business segment did relatively well, with profit increasing by 45% to S$701 million for the whole of 2015 and by 41% to S$368 million during the fourth-quarter of 2015. It must be noted though that Keppel Corp had fully acquired its real estate arm, Keppel Land, in early 2015.
  5. Annual net profit from the infrastructure business segment had declined by 35% to S$207 million, but this was due to an injection of assets into REITs managed by Keppel Corp. For the fourth-quarter of 2015, the infrastructure business saw a 78% year-on-year fall in profit to S$47 million.
  6. 2015 was a good year for Keppel Corp’s Investments business segment as net profit from there had shot up by 216% to S$136 million on the back of gains on equity sales and the sale of a business under K1 Ventures (SGX: K01).
  7. Keppel Corp’s net debt (total borrowings minus cash & equivalents) stood at S$6.37 billion at end-2015 compared to S$1.65 billion at end-2014. This increase in debt led to the firm’s net gearing ratio (net debt to equity) increasing from 0.11 in 2014 to 0.53 in 2015.
  8. Free cash flow decreased as well, dropping from an inflow of S$729 million in 2014 to an outflow of S$694 million in 2015.
  9. The Offshore & Marine segment ended 2015 with a net order book of S$9.0 billion, down from the S$12.5 billion seen at end-2014 and S$10 billion as of 30 September 2015.
  10. Lastly, Keppel Corp announced a final dividend of S$0.22 per share. This brings its full year 2015 dividend to S$0.34, which is 29% lower than the S$0.48 paid in 2014.

As for the company’s outlook, Keppel Corp mentioned in the earnings release that its Offshore & Marine division is “rightsizing its operations and staying vigilant for what could be an extended slowdown, while at the same time building new capabilities and positioning itself to seize opportunities when the upturn comes.”

On the real estate side of things, Keppel Corp commented that it is “focused on strengthening its presence in its core and growth markets, seeking opportunities to unlock value and recycle capital as well as growing its fund management business for a sustainable recurring income stream.”

The conglomerate also touched on its Infrastructure business, saying that it “will remain focused on its power and gas, as well as its other energy-related infrastructure businesses.” Keppel Corp warned that the “electricity market is still expected to remain competitive,” but added that its integrated power and gas business platform gives it the ability to brave through the difficulties.

From the results, it looks like a mixed bag for Keppel Corp. While there were segments which showed growth, there may not be enough to cover for the Offshore & Marine segment which performed very poorly.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay owns shares in Keppel Corporation.