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Nikkei Markets

Property damps Keppel's profit but offshore business improves

Pivot to gas, renewal energy is paying off, says CEO

Keppel, the world's biggest maker of offshore rigs, earned 153 million Singapore dollars ($112.6 million) in the three months ended June, down from S$249 million in the same period a year ago.    © Reuters

SINGAPORE (Nikkei Markets) -- Singapore conglomerate Keppel Corp posted a 39% drop in second-quarter net profit and cut its dividend as earnings from property plunged. But the company's offshore and marine division showed signs of recovery amid a shift to liquefied natural gas and renewal energy.

"The market for offshore drilling rigs remains challenging. However, we continue to seize opportunities in production and LNG assets as well as specialized vessels," CEO Loh Chin Hua said at a briefing.

The company's efforts in the renewables sector are also yielding results although it is not expecting a V-shaped recovery in profits, he added.

Keppel, the world's biggest maker of offshore rigs, earned 153 million Singapore dollars ($112.6 million) in the three months ended June, down from S$249 million in the same period a year ago. The results were much weaker than the S$218 million consensus estimate of analysts polled by Refinitiv.

The company cut its interim dividend for the half year ended June to 8 Singapore cents a share. In the previous period, it offered 15 cents, including a special dividend of 5 cents.

For the six months ended June, Keppel's net profit fell 39% to S$356 million, with the property division continuing to provide the bulk of earnings.

The contribution from property, however, more than halved to S$262 million from S$606 million a year ago. While Keppel has projects across the region, in Singapore residential property activity has been muted by the government's cooling measures introduced about a year ago.

Keppel's infrastructure division, whose businesses include power generation and electricity retail, saw net profit decline to S$59 million from S$66 million.

The offshore and marine division achieved net earnings of S$10 million, compared to a net loss of S$40 million in the first half of 2018.

Singapore's offshore and marine engineering industry has continued to struggle despite the recovery in oil prices over the past three years. Between January and May this year, output from the cluster fell 11% over the same period of 2018, according to data from the Singapore Economic Development Board.

Oversea-Chinese Banking Corp CEO Samuel Tsien said in May that oil companies have reduced deep sea exploration and production due to the availability of alternative energy sources such as shale, and that companies in Singapore's huge offshore and marine would have to restructure and reinvent themselves.

According to Loh, Keppel O&M's new contracts year-to-date total close to S$1.9 billion, more than the S$1.7 billion secured for the whole of 2018.

He added that the division has started hiring and that the number of employees has grown to 11,582 at the end of the June quarter from 10,843 in March.

Keppel's new contracts during the period include offshore wind projects in the German part of the North Sea worth about S$720 million, as well as two offshore windfarm stations for Taiwan.

--Kevin Lim

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