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5 Quick Things Investors Should Learn About Keppel Corporation Limited’s Offshore and Marine segment

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Keppel Corporation Limited (SGX: BN4) is one of the cool companies in Singapore’s stock market that shares webcasts and/or transcripts of their earnings presentations.

Keppel Corporation organizes its business into four divisions: Offshore and Marine (O&M); Infrastructure; Property; and Investments. In late April, Keppel Corporation released its 2017 first quarter earnings. I had recently spent time going through the transcript of the company’s earnings presentation and noted down five important things about the O&M division.

There was a lot of attention on the O&M division as it is an important part of Keppel Corporation’s business (it made up nearly 39% of the company’s 2017 first quarter revenue) and had suffered multiple setbacks in recent years.

Here are my notes:

1. In his opening speech, Keppel Corporation’s chief executive officer (CEO), Loh Chin Hua, said the O&M business broke even despite the prolonged downturn in the industry. He added that the fall in the segment’s net profit was caused by lower volume of work.

2. Loh said that contributions from associates kept the business at break-even even though the core O&M business did not make enough profit to cover fixed costs. He also commented that the result showed the importance of the rightsizing efforts that the O&M division had swallowed.

3. Yet, efforts to rightsize the division will continue. Loh said that two overseas yards will be mothballed while another three supporting yards in Singapore will be closed. Keppel Corporation also decided to reduce its workforce by another 1,250 people in the first quarter of 2017.

4. Loh said that Keppel Corporation has reduced its workforce by 49% or almost 18,000 people since 2015. He said that the company could be reaching a “steady state” for its current level of work.

5. There were some positive news as well. Keppel FELS has reached an agreement with Borr Drilling for the latter to take over the contracts for five jack-up rigs from another customer, Transocean. Borr Drilling will be making a down payment of US$275 million as part of the deal. The deliveries of the first three rigs will also be pushed forward into 2017 and 2018 with the rest coming in 2020.

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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.