Keppel Profit Drops 38% on ‘Challenging’ Marine Sector

  • Company slashed 26% of workforce in 9 months through September
  • ‘Painful measures’ to continue for offshore business: Keppel

Keppel Corp., the world’s biggest oil rig builder, reported a 38 percent decline in its third-quarter profit as weak oil prices led to delivery delays for offshore projects.

Net income fell to S$224.5 million ($162 million) in the three months ended September, compared with S$362.9 million a year ago, Keppel said in a statement on the Singapore stock exchange Thursday. Sales dropped 40 percent to S$1.46 billion.

Keppel is among Asian shipyards that have slashed jobs and are considering reducing capacity as orders have slumped, while existing projects are delayed or canceled. Rig operators are facing rising debt following spending cuts by energy explorers after crude prices dropped almost 40 percent in the past two years.

The company said it has reduced its direct workforce by about 8,000 or 26 percent in the nine months through September and added ‘painful measures’ will continue at its offshore business.

Keppel also has been hit by non-payment by one of its biggest clients, Sete Brasil Participacoes SA, which filed for bankruptcy protection in April.

Shares of Keppel rose 0.4 to close at S$5.44 in Singapore before the earnings announcement. The stock has fallen 16 percent, the second-worst performer on the 30-member Straits Times Index this year.

Highlights from statement:

* Offshore market demand to stay ‘tepid’

* Offshore marine unit’s 3Q net income S$11 million vs S$166 million year ago

* Senior management has taken salary reduction

* Offshore marine business cut 3,080 jobs in the third quarter

* Directors have proposed lower fees for 2016

* S$230 million provision taken for Sete Brasil is ‘adequate’

* Contracts in offshore business at S$500 million year to date

* Keppel Land divestments year-to-date at S$530 million

* Looking at “selective retrenchment” in Singapore

(Corrects sales figure in second paragraph.)
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