High Overhead and Material Costs Cut Deep into Profits at Keppel Corp

Keppel Shipyard – Tuas, image: Keppel O&M

SINGAPORE–Keppel Corp. (BN4.SG) Thursday said third-quarter net profit fell 14.7% from a year earlier as a rise in costs outpaced revenue growth.

Net profit for the three months ended Sept. 30 fell to S$346.4 million from S$406.1 million a year earlier.

Revenue rose 19% to S$3.22 billion due to higher revenue from its offshore and marine and property divisions, the company said in a statement.

Material and subcontracting costs soared 32.8% to S$2.3 billion while staff costs rose 9.8% to S$395 million, it said.

Keppel’s Chief Executive Choo Chiau Beng projected a positive outlook, saying that offshore exploration and production spending remains buoyant, supported by Brent oil prices of above US$100 per barrel.

“Oil companies have strong impetus to continue sanctioning projects. Recent discoveries in the North Sea, as well as deepwater Mexico and both coasts of Africa, have also fueled optimism for further exploration work,” Mr. Choo said in the statement.

Keppel, the world’s biggest rig builder by volume, secured S$8.8 billion of new orders in the nine months ended Sept. 30, taking total orders at its marine and offshore division to S$13.1 billion, with deliveries extending into 2019.