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Machinery & Industrial Equipment

Keppel touts progress in new areas as property damps profit

Data centers, electricity retailing among promising businesses

Keppel earned 159 million Singapore dollars in the three months ended September, down 30% from the same period a year ago. (Photo by Keiichiro Asahara)

SINGAPORE (Nikkei Markets) -- Conglomerate Keppel Corp played up its progress in new areas such as data centers and electricity retailing as its quarterly net profit fell by nearly a third, damped by its substantial property business.

CEO Loh Chin Hua said at a briefing that the company had performed "creditably" amid a volatile international environment marked by trade tensions and slowing global growth.

Loh referred to stronger contributions from the offshore & marine, infrastructure, and investments divisions over the past nine months.

Keppel, whose biggest shareholder is Singapore state investor Temasek Holdings, earned 159 million Singapore dollars ($116.5 million) in the three months ended September, down 30% from the same period a year ago. However, the results were better than the consensus estimate of S$138 million in a Refinitiv poll.

Keppel attributed the profit decline to the absence of one-off gains in the property sector.

For the nine months to September, net profit fell 37% to S$515 million.

The company's debt burden increased sharply during the course of the year with net gearing, or debt to equity, rising to 0.88 at the end of September from 0.48 at the end of last year.

Commenting on the results, chief financial officer Chan Hon Chew said the property division's third-quarter pretax profit halved to S$123 million, mainly due to the absence of divestment gains. The division has become the main contributor to earnings since oil prices collapsed about five years ago, hurting profits at Keppel O&M.

The infrastructure division, however, managed to grow pretax profit by 53% to S$92 million on the back of fair value gains relating to its data centers.

Keppel O&M saw pretax profit fall 20% to S$8 million despite higher operating profit mainly due to net interest expenses and an increase in losses from associates.

Chan said it was premature to talk about write-backs following a settlement agreement with Sete Brasil over six uncompleted oil rigs as there were still details to be worked out. Keppel has to date made provisions of some S$476 million.

Keppel O&M and local rival Sembcorp Marine said last week that they had reached a settlement agreement with the Brazilian company over their outstanding contracts, resolving long-standing disputes worth billions of dollars and removing a major source of uncertainty about prospects.

Looking ahead, Loh said Keppel would continue to seek opportunities in the data center business and that it was committed to building more energy-efficient ones.

Loh also highlighted Keppel's success in Singapore's newly liberalized electricity retailing business.

Recently released statistics from the Energy Market Authority showed Keppel Electric as the top retailer with a 27% market share of residential consumers, he said.

--Kevin Lim

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