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The Good And Bad That Investors Should Know About Keppel Corporation Limited’s 2017 Earnings

Keppel Corporation Limited (SGX: BN4) is a conglomerate with a few major business segments: Offshore & Marine; Property; Infrastructure; and Investments.

Last week, the company reported its 2017 fourth quarter and full year earnings update. There are both positive and negative takeaways that investors may want to learn about. But first, let’s take a look at Keppel Corp’s results for 2017.

Here’s a table showing changes in the company’s revenue, operating profit, net profit, and earnings per share in 2017:


Source: Keppel Corp 2017 full year earnings press release

The positives

Firstly, Keppel Corp produced growth in net profit in 2017 (excluding the costs from the Offshore & Marine segment’s corruption-related one-off financial penalty). This was driven by an improvement in profitability in all its segments, except for the Offshore & Marine segment.

Secondly, the company’s free cash flow improved from S$540 million in 2016 to S$1.80 billion in 2017, mainly due to an improvement in the management of its working capital. To the point, in 2016, working capital changes resulted in an outflow of S$586 million in cash, whereas there was an inflow of S$1.29 billion in cash in 2017.

Thirdly, Keppel Corp’s balance sheet had grown stronger. At the end of 2017, the conglomerate had S$2.27 billion in cash and equivalents, with total borrowings of S$7.79 billion. This translates to a net debt position of around S$5.52 billion, which is an improvement from the S$6.97 billion in net debt that it had at the end of 2016.

Lastly, the conglomerate raised its full-year dividend in 2017 to S$0.22 per share, from S$0.20 per share in 2016.

The negatives

Firstly, revenue came in lower in 2017 compared to 2016. This was due to a lower top-line in its Offshore & Marine, and Property segments.

Secondly, the conglomerate’s EBITDA (earnings before interest, taxes, depreciation, and amortization) as well as operating profit came in lower in 2017. The former was down by 4% to S$988 million, while the latter declined by 2.5% to S$775.7 million.

Lastly, the Offshore & Marine segment incurred a loss of S$835 million in 2017, compared to a net profit of S$29 million a year ago. This was mainly due to the aforementioned one-off financial penalty, which amounted to S$619 million. Some other big culprits were an S$81 million provision for losses made on Sete Brasil-related projects, and a S$54 million impairment on certain assets.

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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.