Keppel Reports Net Profit of S$160m in 1Q 2020

Source: 4/29/2020, Location: Asia

Keppel Corporation Limited reported a net profit of S$160 million for the first three months of 2020, 21% below the S$203 million for 1Q 2019, mainly due to an absence of gain from the divestment of a 70% interest in Dong Nai Waterfront City, Vietnam a year ago. Many Keppel business units provide essential services and continue to operate during the circuit breaker in Singapore.

The Group achieved revenue of S$1,857 million for 1Q 2020, which was 21% higher than that of 1Q 2019, due mainly to higher revenues from offshore & marine projects, property trading projects in Singapore, the power and gas business, and with the consolidation of M1. Revenue growth for 1Q 2020 was partly offset by lower contributions from property trading projects in China, environmental engineering projects and asset management.

In 1Q 2020, the Group achieved an annualised return on equity of 5.7%. Net gearing was 0.88x as at 31 March 2020, compared to 0.85x as at 31 December 2019, mainly due to acquisitions and investments during the quarter. Free cash inflow was S$37 million in 1Q 2020 compared to an outflow of S$534 million in 1Q 2019, mainly due to lower working capital requirements.

Mr Loh Chin Hua, CEO of Keppel Corporation, said, ďCOVID-19 is having a massive impact on the world. While Keppel is not directly involved in the sectors most severely affected by COVID-19, our businesses have inevitably been affected by the fall in global economic activity, lockdowns in various countries, disruptions to the workforce and supply chains, as well as the sharp drop in oil prices.

ďAll our key business units remain profitable and Keppel continues to have a strong balance sheet and the necessary credit lines to finance our operations. Nevertheless, given the tightening liquidity environment, we are watching our cashflow and gearing carefully, and will manage costs across the Group, as we prepare for a difficult operating environment that may persist for some time. I am confident that working together as a group, and with the support of our stakeholders, we will overcome the challenges of COVID-19 and emerge stronger.Ē

Offshore & Marine
The Offshore & Marine (O&M) Division registered a net profit of S$3 million for 1Q 2020, compared to a net profit of S$6 million a year ago, due mainly to the share of losses from associated companies which had offset the Divisionís stronger operating results. Keppel O&Mís operating profit for 1Q 2020 was S$28 million, an improvement over the S$3 million recorded in 1Q 2019.

In Singapore, Keppel O&Mís yards continue to provide essential services in ship/vessel repair and maintenance and overhaul during the circuit breaker with reduced manpower and various precautionary measures in place. Most of the companyís overseas yards are also operational, albeit with varying restrictions.

Keppel O&Mís efforts to rightsize its operations and diversify from oil-related projects over the past few years is helping it to remain resilient amid challenging conditions posed by the COVID-19 pandemic and the collapse in oil prices. Notably, renewables and gas-related solutions, make up over 70% of the Divisionís net orderbook of S$4.0 billion as at end-March 2020.

The Property Division recorded a net profit of S$35 million for 1Q 2020, 73% lower than S$132 million for 1Q 2019, due mainly to the absence of gain from the disposal of a partial interest in Dong Nai Waterfront City, Vietnam and a tax writeback a year ago.

In 1Q 2020, Keppel Land sold 450 homes, about 15% higher than the 390 homes sold in 1Q 2019. China contributed over 70% of sales volume, with more than 200 homes sold taking place in February and March, after the COVID-19 outbreak, reflecting the improving confidence and sentiments in the country. In Singapore, the market slowed down with the closure of showrooms during the circuit breaker and more cautious sentiments among buyers; while the Vietnam market remained relatively resilient during the quarter. Keppel Landís commercial portfolio, which comprises mainly office buildings, remain relatively resilient against the impact of COVID-19.

The Infrastructure Divisionís net profit of S$174 million for 1Q 2020, was higher compared to S$16 million in 1Q 2019, mainly due to a mark-to-market gain of S$131 milion from the reclassification of the Groupís interest in Keppel Infrastructure Trust from an associated company to an investment. Excluding this, Keppel Infrastructureís earnings have doubled compared to 1Q 2019, with higher contributions from Energy Infrastructure.

Demand for infrastructure and connectivity solutions remain resilient in spite of the COVID-19 pandemic. In April 2020, a Keppel-led consortium secured a S$1.5 billion contract to design and build a 2,900 tonnes per day (tpd) waste-to-energy plant and a 250 tpd Materials Recovery Facility, which will be part of Singaporeís new integrated waste management facility. With COVID-19 and work from home arrangements further driving demand for digital connectivity, Keppel Data Centres has received enquiries from customers on new data centre capacity. Keppel Data Centres is also exploring the feasibility of developing a Floating Data Centre Park at the Loyang Offshore Supply Base in Singapore.

The Investments Division recorded a net loss of S$52 million for the first quarter of 2020, as compared to net profit of S$49 million in 1Q 2019. This was mainly due to the absence of re-measurement gains from previously held interests in M1, as well as mark-to-market losses on some of the Groupís investments.

Despite the challenging economic climate, Keppel Capital continued to see strong investor interest for quality real assets that provide stable, long term cashflows. The new US$1 billion Keppel Asia Infrastructure Fund and its co-investment vehicles are progressing steadily with aggregate capital commitments of US$570 million.

M1 has enhanced the connectivity solutions across its business lines to support customersí needs amid COVID-19. During the quarter, M1 added 20,000 postpaid customers. However, roaming and prepaid revenues have fallen due to the sharp drop in international travel, while the sale of handsets and information and communications technology related equipment have also slowed as customers defer their spending and supply chains are disrupted. M1 and StarHub have also submitted a joint bid for a 5G licence in Singapore.

In April 2020, a residential plot in the Sino-Singapore Tianjin Eco-City was sold for RMB1.17 billion, reflecting the continuing confidence and demand for land in the Eco-City.

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