Keppel's Profit Nosedives
Keppel Corp., the world’s largest builder of oil rigs, posted a 41 per cent fall in quarterly profit, its fourth straight decline, as offshore and marine segment revenue slumped because of the deferment of some projects and suspension of contracts related to Sete Brasil.
The Singapore conglomerate has been hit by the 60 per cent drop in oil prices since mid-2014. Its businesses include property development and infrastructure.
Net income dropped to S$211 million ($156 million) from S$360 million a year earlier, Keppel said in a statement Monday. Sales slumped 38% to S$1.7 billion from S$2.8 billion. The higher contribution from its property business at 47% helped to partially offset lower profits from offshore and marine sectors, the company said in the statement.
Oil companies and rig operators face rising debt and spending cuts, and have abandoned orders or asked shipyards to delay deliveries of offshore drilling rigs and production facilities. That’s caused shipyards to post losses or smaller profits after writing off costs from projects under construction, and demand has fallen with crude prices still less than half of what they were three years ago.
"The sustained low oil price environment continues to take a toll on the global oil and gas industry, which is in the midst of one of the most severe downturns in recent years," CEO Loh Chin Hua said in the statement.
Sete Brasil Participacoes SA, embroiled in a corruption probe known in Brazil as Lava Jato and debating whether it should file for bankruptcy, stopped paying Keppel last year on its orders for rigs. Keppel announced a S$230 million ($170 million) charge in January on the delinquent projects.
Loh said Brazil "continues to be mired in economic and political challenges" and reiterated the group's stance of not resuming construction until payment restarts.
Meanwhile, the offshore and marine division secured $200 million of new orders as at March 31, and its net order book stands at $8.6 billion.
