Keppel Corporation Limited’s Latest Earnings: Offshore & Marine Segment Remains Weak

Keppel Corporation Limited (SGX: BN4) reported its 2017 first quarter earnings yesterday. The reporting period was for 1 January 2017 to 31 March 2017.

As a brief background, Keppel Corporation has four different business units: Offshore & Marine (O&M); Property; Infrastructure; and Investments. You can catch up with the results from the company’s previous quarter here.

Financial highlights

The following’s a quick summary of some of the latest financial figures for Keppel Corporation:

1. Revenue plunged 28.4% to $1.25 billion in the reporting quarter. In the first quarter of 2016, Keppel Corporation recorded $1.74 billion in revenue.

2. But, profit attributable to shareholders was up 23.7% to end at $260.4 million. Keppel Corporation benefited from a better performance from its associate companies.

3. As a result, earnings per share (EPS) grew by 22.4% from 11.6 cents in the first quarter of 2016 to 14.2 cents in the reporting quarter.

4. Cash flow from operations was a negative $9.4 million for the first quarter of 2017. Capital expenditure was $128.6 million. This gave Keppel Corporation a negative free cash flow of $138 million, up from the negative free cash flow of $404 million recorded a year ago.

5. As of 31 March 2017, Keppel Corporation has $1.85 billion in cash and equivalents and borrowings of $8.93 billion. This adds up to a net debt position of $7.08 billion. The conglomerate’s balance sheet weakened compared to a year ago; Keppel Corporation had a net debt position of $6.81 billion back then.

In all, Keppel Corporation’s revenue continues to be weak. But, the conglomerate did see an improved bottom-line and lower negative free cash flow. Still, operating cash flow continues to be negative, while the cash balance weakened slightly.

Operational highlights

Loh Chin Hua, Keppel Corporation’s chief executive officer, summed up the reporting quarter with the following comments:

“As we had cautioned at the Full Year 2016 results announcement in January, despite the increased optimism in the market following the rebound in oil prices, the offshore business continues to face very challenging conditions. This is due to, among other factors, the oversupply of rigs and support vessels. It will take some time before the industry fully recovers.”

With Loh’s comments as the backdrop, it should not be a surprise that the core O&M segment continues to suffer.

For the reporting quarter, the O&M segment saw its revenue plunge 41% to $483 million while showing zero profit. The net orderbook stood at $3.5 billion, a decline from the $3.7 billion recorded at end-2016.

Keppel Corporation’s Property segment also saw its revenue plunge 48% year-on-year to $262 million while net profit was down 3% to $103 million. Elsewhere, the Infrastructure segment had better news. This segment saw its revenue and profit increase by 20% (to $467 million) and 129% (to $32 million), respectively.

At its closing share price of $6.55 yesterday, Keppel Corporation traded at a price-to-earnings ratio of 14.4 and a trailing dividend yield of around 3.1%.

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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 writer Chin Hui Leong doesn't own shares in any company mentioned.