How Did Keppel Corporation Limited’s Offshore & Marine Business Fare In The First Quarter Of 2018?

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

In mid-April, Keppel Corp reported its 2018 first quarter earnings. Given that the company has a few businesses, I thought it would be useful to take a separate look at each of the segments. In this article, my focus is on the Offshore & Marine segment. [Editor’s note: Articles discussing the Property and Infrastructure segments have been published. They can be found here and here.]

The financial performance

Here’s a table showing some key financial numbers for the Offshore & Marine business for the first quarter of 2018:

Source: Keppel Corp 2018 first quarter earnings presentation

We can see that the segment did not have a good quarter. Revenue was down 31% due to lower volume of work and deferment of some projects, and the pre-tax loss widened from a year ago.

Clearly, the recent upturn in oil prices (an increase from around US$50 per barrel at the start of 2017 to around US$70 right now) has yet to benefit the Offshore & Marine segment.

The order book

The Offshore & Marine segment’s order book is a good indicator of the overall health of this business. Any growth in the order book could mean that the segment has turned around.

As of 31 March 2018, the net order book of the segment (excluding orders from Sete Brasil) stood at S$4.3 billion This is higher than the net order book value seen at end-2017 (S$3.9 billion), and could indicate that the Offshore & Marine business may finally be seeing some light at the end of the tunnel.

The future

In Keppel Corp’s latest earnings update, the conglomerate shared a few words on the Offshore & Marine segment’s future:

“The Offshore & Marine Division’s net order book, excluding the Sete rigs, stands at $4.3 billion. The Division will continue to focus on delivering its projects well, exploring new markets and opportunities, investing in R&D and building new capabilities to position itself for the upturn. The Division is also actively capturing opportunities in production assets, specialised vessels, gas solutions and niche markets, as well as exploring ways to re-purpose its technology in the offshore industry for other uses.”

Some closing words

In sum, Keppel Corp’s Offshore & Marine segment continued to deliver a weak performance.

Yet, with oil prices currently around US$70 per barrel, companies in the oil and gas industry may start to invest in their businesses again. If this is true, investors should see better performance from the Offshore & Marine segment of Keppel Corp in the near future.

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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.