Keppel Profit Hit by Weak Rig Orders

File photo shows jackup rigs under construction at the Keppel FELS shipyard in Singapore. Photo credit: Maersk

SINGAPORE, Oct 20 (Reuters) – Singaporean conglomerate Keppel Corp reported a 38 percent fall in its third-quarter profit as low oil prices resulted in a dearth of orders for its drilling rigs, offsetting a 4 percent rise in revenues at its property division.

Keppel, in which Singapore state investor Temasek is the biggest shareholder, reported a net profit of S$225 million ($162 million) for the three months ended Sept. 30 versus S$363 million a year ago. Revenue fell nearly 40 percent to S$1.46 billion.

“Despite the gradual recovery in oil price, demand in the offshore market is expected to remain tepid. Oversupply remains a key concern in the offshore market, worsened by the overhang of rigs still under construction,” Chief Executive Loh Chin Hua said in a results briefing.

The city-state’s offshore and marine industry has been pummelled as clients cut spending to weather the slide in oil prices, hurting Keppel and cross-town rival, Sembcorp Marine .

Some smaller firms have disclosed debt troubles, with oilfield services firm Swiber Holdings placed under judicial management.

Net profit at Keppel’s offshore and marine (O&M) division, which builds offshore drilling rigs and support vessels, dropped 93 percent to S$11 million. The segment’s revenue fell 63 percent.

The company has been cutting costs in the O&M segment, which has reduced its direct workforce by nearly 8,000, or around 26 percent, in the first nine months. Keppel said it was reviewing its yard capacity in light of a decline in workload.

The division recorded a net order book worth S$4.1 billion. Since the last quarter, Keppel has excluded orders from rig leaser Sete Brasil, which has filed for bankruptcy protection amid a wider corruption scandal.

In Brazil, a former Keppel lobbyist, Zwi Skornicki, has been charged with corruption. The company has said that certain transactions associated with Skornicki may be suspicious.

On Thursday, the CEO reiterated the company’s zero-tolerance stance against illegal activity and said the matter was under review.

While revenue at the company’s infrastructure and investments segments also fell, it rose 4 percent at the property division for the quarter. It sold about 3,510 homes in the first nine months of this year compared with 3,110 homes in the same period a year ago. (Reporting by Aradhana Aravindan; Editing by Subhranshu Sahu and Amrutha Gayathri)