Keppel reports 4Q18 net profit of S$135 million after year-earlier penalty

Keppel Corp. reported on Thursday that its fourth quarter swung to a net profit of S$135 million, from a year-ago loss of S$492 million.

But the company noted that excluding 2017’s S$619 million one-off financial penalty and related costs from Keppel O&M’s resolution with criminal authorities in the U.S., Brazil and Singapore, net profit for the quarter would have been 6 percent higher on-year.

Daiwa had forecast fourth quarter net profit of S$180 million, which it said it expected was “unlikely to be inspiring,” and largely supported by the property division.

Revenue for the quarter ended 31 December was S$1.68 billion, up 9 percent on-year, the conglomerate said in a filing to SGX after the market close on Thursday.

For the full year, Keppel reported net profit of S$944 million, up 382 percent from S$196 million in the year earlier, due to the financial penalty, while revenue was nearly flat at S$5.97 million. It said full-year net profit would have been up 16 percent on-year, excluding the year-ago penalty.

Keppel proposed a final cash dividend of 15.0 Singapore cents a share, which including the interim cash dividend of 10.0 Singapore cents and special cash dividend of 5.0 Singapore cents, brought the total 2018 distribution to 30.0 Singapore cents a share. The previous year’s final cash dividend was 14 Singapore cents.

Outlook

In his outlook, Keppel CEO Loh Chin Hua pointed to a more uncertainty for the international economy, with slowing growth and trade tensions.

Loh noted property cooling measures in China and Singapore were weighing sentiment, while cleaner forms of energy, such as LNG, and environmental services, such as waste-to-energy plants, and data centers were seeing growing demand.

“Beyond executing our existing businesses, we are actively exploring and investing in new businesses, such as senior living and renewable energy infrastructure, with a view to developing future growth engines,” Loh said in a prepared statement. “We remain disciplined in picking only businesses that fall within our mission of providing solutions for sustainable urbanisation.”

Offshore and Marine

The offshore and marine division posted a full-year net loss of S$109 million, narrower than the year-ago net loss of S$826 million, due to the year-earlier penalty, it said. Excluding the penalty, 2017’s net loss for the division would have been S$207 million, it said.

Keppel said the division’s improved performance was mainly on higher revenue, a write-back of provisions for claims and lower net interest expense, which was partly offset by provisions for expected losses on Sete Brasil contracts and other asset impairments. Excluding the provisions and write-back, the division would have posted a full-year net profit of S$6 million, Keppel said.

New contracts in 2018 were around S$1.7 billion, it said.

Property

The property division posted full-year net profit of S$938 million, up 44 percent on-year, mainly on en-bloc sales of development projects and gains from divesting a stake in a Beijing commercial project.

Infrastructure

The infrastructure division posted full-year net profit rose 26 percent on-year to S$169 million, mainly on a dilution gain from Keppel DC REIT’s private placement exercise, the gain from a stake sale in Keppel DC REIT and higher contributions from environmental infrastructure and infrastructure services, the filing said.

That was partly offset by lower contributions from energy infrastructure and share of profits from Keppel Infrastructure Trust and the absence of gains from the year-ago divestment of GE Keppel Energy Services, it said.

Investments

The investments division posted a full-year net loss of S$54 million, swinging from a year-ago net profit of S$238 million, mainly on its share of losses from KrisEnergy, the impairment of an investment in an associated company, and lower contributions from the asset management business and the Sino-Singapore Tianjin Eco-City, Keppel said.

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