Keppel Q1 Profits Dip Slightly

The Keppel Corporation released its limited unaudited results for the first quarter ending March31, 2014, reporting a 5% decrease in net profits to S$339 million compared to Q1 2013's S$357 million, though the company attributed the decline to one-off gains from the reversal of provision from the sale of a power barge and write-back of tax provision made by Keppel Land in Q1 2013.

Earnings per share also fell, now 18.7 cents, down 6% from 1Q 2013's 19.8 cents, while economic value added decreased from S$217 million to S$151 million. The group reported cash outflow of S$395 million with annualized return on equity at 13.4%.

Keppel Corporation CEO, Loh Chin Hua, delivered a webcast address discussing the group’s financial results for the first quarter 2014, joined by the corporation’s new CFO, Chan Hon Chew. Loh Chin Hua cited geopolitical tensions, U.S. tapering and global uncertainty in emerging markets as factors contributing to the groups slow start, but said the company will aim for growth in targeted niche segments.

“Our business divisions continued to perform creditably in the first three months of 2014, contributing to a net profit of $339 million for the Group,” Loh Chin Hua said. “Albeit lower than the $357 million net profit last year, the Group's operating performance has improved. Excluding one-off items from the corresponding period last year, net profit is largely in line year-on-year. I will leave our CFO to present the details.”

Though the first quarter appeared slow for the company overall, Keppels’ offshore and marine division started 2014 strong. Coming off solid offshore and marine performance in Q1 2014, Keppel remains confident in its long-term marine industry objectives. New orders over the period totaled roughly $1.9 billion, bringing the company’s net orderbook to a record high $14.4 billion as at end-March 2014, with visibility into 2019.

“Growing global energy demand and a stable oil price of above US$100 a barrel continue to support global E&P spending, which is still expected to grow in 2014, albeit at a slightly slower pace of 6%, compared to 7% the year before. In Latin America alone, E&P spending is projected to rise by 13% in 2014, led by countries such as Mexico. While international oil majors are tightening their belts, we believe they will be highly selective about the areas to pull back on,” said Loh Chin Hua.

“Jackup rig fundamentals are still robust. By 2015, more than 220 units of the global jackup fleet will be over 30 years old. The current market for jackups remains tight with utilization close to 100%. The ongoing bifurcation towards premium assets and the rig-replacement cycle are expected to continue supporting the order momentum. This is evident from the five jackup orders that we clinched in 1Q 2014 alone.”