UPDATE: Keppel Corp reports 2Q19 net profit dropped 39 percent on year-ago en bloc sales

This article was originally published on Thursday, 18 July 2019 at 17:32 SGT; it has since been updated.

Keppel Corp. reported Thursday its second quarter net profit dropped 39 percent on-year to S$153 million on the absence of year-ago contributions from en bloc property sales.

CGS-CIMB had forecast S$125 million in profit for the quarter.

The decline was partly offset by stronger performances from Keppel Offshore & Marine, Keppel Infrastructure and Keppel Capital, the company said in a filing to SGX after the market close.

Revenue for the quarter ended 30 June rose 17 percent on-year to S$1.78 billion on higher contributions from Keppel Infrastructure, Keppel Land, Keppel Capital and M1.

Offshore & Marine

The offshore and marine division reported revenue for the second quarter dropped 21 percent on-year to S$481 million, Keppel said.

“In the second quarter of 2018, the Offshore & Marine Division recognized revenue from the sale of jackup rigs to Borr Drilling Limited, while there was no equivalent sale this year,” the filing said.

The segment’s net profit for the second quarter was S$4 million, swinging from a year-ago net loss of S$17 million, Keppel said.

CGS-CIMB had estimated net profit for the offshore and marine division would come in at S$12 million on sales of S$419 million.

Keppel said the division’s net orderbook of S$5.5 billion was its highest since 2016.

In prepared remarks, CEO Loh Chin Hua was cautiously upbeat.

“The market for offshore drilling rigs remains challenging. However, we continue to seize opportunities in production and LNG assets as well as specialised vessels,” Loh said in the statement. “Keppel O&M’s efforts to reshape its business are also bearing fruit, especially in the renewables sector.”

He noted Keppel had secured new contracts for offshore wind projects worth around S$720 million and two offshore windfarm projects from Orsted.

Property

For the second quarter, revenue from the property division rose 11 percent on-year to S$271 million, mainly on higher revenue from China trading projects, partly offset by lower contributions from Singapore trading projects, Keppel said.

Net profit for the property division was S$130 million, down 43 percent on-year, the filing said.

Keppel said the property division contributed 85 percent of overall net profit.

The company reported second-quarter pre-tax profit for the property division fell by S$99 million on-year to come in at S$161 million on the absence of year-ago gains for the en bloc sales of development projects Keppel Bay Property Development (Shenyang), Keppel Township Development (Shenyang) and Quoc Loc Phat Joint Stock Co.

CGS-CIMB had forecast property net profit of S$92 million or sales of around S$584 million.

The division soled around 2,100 homes with a total sales value of around S$1.2 billion in 2019’s first half, up from 1,385 units in the year-ago period, Loh noted.

“Despite cooling measures in China, our well-located projects in high growth cities such as Nanjing, Wuxi and Tianjin continue to draw strong interest,” Loh said.

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Infrastructure

Infrastructure division revenue increased 12 percent on-year to S$726 million in the second quarter on increased sales in the power and gas businesses and progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project.

The segment’s pre-tax profit increased by S$7 million on-year to S$51 million on higher contributions from Energy Infrastructure and Environmental Infrastructure and on a share of Keppel Infrastructure Trust’s profit, Keppel said. It added that was partly offset by the absence of a year-earlier dilution gain from Keppel DC REIT’s private placement exercise and lower contributions from the logistics business.

The division posted net profit of S$43 million, up 8 percent on-year.

CGS-CIMB had estimated the division would post second quarter net profit of S$36 million on sales of S$643 million.

Investments division

The Investments division revenue increased by S$281 million on-year, or by more than 500 times, to S$306 million, mainly on the consolidation of M1 and higher revenue from the asset management business, Keppel said.

The division reported a second-quarter pre-tax loss of S$10 million, swinging from a year-ago pre-tax profit of S$5 million, mainly on posting a net interest expense, compared with a year-earlier net interest income. It also reported a fair value loss on KrisEnergy warrants, compared with a year-ago fair value gain.

The division’s net loss was S$11 million, wider than the year-ago net loss of S$2 million, Keppel said.

CGS-CIMB had forecast a net loss of S$16 million for the quarter on sales of S$143 million.

Keppel proposed a dividend of 8 Singapore cents, compared with the year-earlier’s 10 Singapore cent interim dividend and year-earlier 5 Singapore cent special dividend.

 

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