3 Things Investors Should Know From Keppel Corporation Limited’s 2016 Full Year Results

Keppel Corporation Limited (SGX: BN4) is a conglomerate with a few major business segments, namely, Offshore and Marine, Property, Infrastructure, and Investment.

The company recently reported its 2016 full year results. Here are four useful pieces of information from the results announcement:

1. The overall result

Here’s a table showing some important items from Keppel Corp’s income statement for 2016 and 2015:

Keppel Corp income statement 2016
Source: Keppel Corp 2016 earnings presentation

One thing that stands out is that Keppel Corp’s revenue, operating profit, and net profit all suffered big double-digit declines when compared to 2015. As a result of the weak financial performance, the company’s dividend in 2016 was also slashed from S$0.34 per share in 2015 to S$0.20 in 2016.

Keppel Corp experienced a terribly challenging year in 2016 due primarily to difficulties seen in its Offshore & Marine segment. The segment ended the year with massive falls in revenue (down 54% to S$2.85 billion) and profit (down 94% to S$29 million).

2. Some positives

Despite what we’ve just seen, there are still some bright spots within Keppel Corp’s business.

Firstly, the company’s Property segment was relatively resilient in 2016; its net profit dipped by only 6% to S$620 million in the year. Within the segment, the Keppel Land subsidiary recorded net profit growth of 3.9% from S$564 million to S$586 million.

The Property segment also saw strong residential sales in 2016; during the year, some 5,720 homes were sold (those homes were found mostly in China and Vietnam), around 25% higher than the 4,570 homes sold in 2015.

The Infrastructure segment performed well too, registering a net profit of S$84 million for 2016 after excluding revaluations, impairments, and divestments. This was higher than 2015’s self-same figure of S$46 million.

For the Infrastructure segment, Keppel Corp will continue pursuing growth opportunities in energy and environmental infrastructure both in Singapore and overseas.

3. The macro environment

For Keppel Corp’s Offshore & Marine segment, the company acknowledged that spending by oil majors is expected to increase given the rise in oil prices to around US$55 per barrel, double what it was a year ago. Yet, the company does not envisage a quick recovery for its business, which continues to be under pressure due to “weak utilisation of the existing operating fleet, coupled with a supply overhang of newbuilds.”

For Keppel Corp as a whole, the company thinks that  the two mega trends of urbanisation and digitalisation of the economy are tailwinds for a multi-business group, such as itself, which “can provide solutions to meet the growing demand for energy, infrastructure, clean environment, good urban space and connectivity.”

In sum, Keppel Corp ended a challenging 2016 with significantly weaker results as compared to 2015. But there are still some bright spots in its business (the Property and Infrastructure segments). The company also thinks that it ultimately has a good future given the two societal mega trends that it is seeing.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.