Keppel reports 3Q19 net profit dropped 30 percent on lower property divestment gains

Keppel Corp. reported Thursday its third quarter net profit dropped 30 percent on-year to S$159 million, mainly on year-ago gains from divesting a commercial development in Beijing and higher net interest expense.

That was offset by higher contributions from associated companies and property trading projects in China and Singapore, Keppel said.

Revenue for the quarter ended 30 September increased 60 percent on-year to S$2.07 billion on higher recognition form offshore and marine, property and infrastructure projects, and on increased sales in the power and gas business and from consolidating M1’s results, the company said in a filing to SGX.

The share of results of associated companies climbed 97.7 percent on-year to S$77.82 million, Keppel said.

Interest expenses jumped 66.6 percent on-year in the quarter to S$85.89 million, Keppel said. Depreciation and amortization costs surged 143.9 percent on-year to S$105.08 million for the quarter on changes in accounting for leases, the filing said.

For the nine-month period, Keppel reported net profit fell 37 percent on-year to S$515 million on revenue of S$5.38 billion, up 26 percent on-year.

Offshore and Marine

The offshore and marine division reported revenue rose 52 percent on-year to S$632 million, while its pretax profit fell 20 percent on-year to S$8 million. Net profit for the segment was S$8 million, up 300 percent on-year, the filing said.

The revenue increase was on higher revenue recognition from ongoing projects, Keppel said.

But pretax profit fell mainly on net interest expense, compared with net interest income in the year-ago period, and a higher share of associated companies losses, Keppel said.

The net orderbook, excluding Sete rigs, was at S$5.1 billion, Keppel said.

“The division will continue to focus on delivering its projects well, exploring new markets and opportunities, investing in R&D and building new capabilities. The division is also actively capturing opportunities in production assets, specialised vessels, gas solutions, offshore renewables and floating infrastructure, as well as exploring ways to re-purpose its technology in the offshore industry for other uses,” Keppel said.

Property

The property segment reported its revenue jumped 114 percent on-year to S$385 million, while its pretax profit fell 50 percent on-year to S$123 million. Net profit for the segment was S$78 million, down 52 percent on-year, the filing said.

Revenue for the property division was higher mainly on higher revenue from property trading projects in China, Vietnam and Singapore, Keppel said.

But pretax profit for the property segment fell mainly on the absence of year-earlier divestment gain and higher net interest expense, Keppel said.

“The division will remain focused on strengthening its presence in its key markets such as Singapore, China and Vietnam and scaling up in other markets such as Indonesia and India, while seeking opportunities to unlock value and recycle capital,” Keppel said.

Infrastructure

The infrastructure segment reported its revenue rose 10 percent on-year to S$742 million for the quarter, while its pretax profit increased 53 percent on-year to S$92 million. Net profit for the segment was S$86 million, up 56 percent on-year, the filing said.

Revenue for the infrastructure segment increased on higher sales in the power and gas business and progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project, Keppel said.

Pretax profit for the segment grew on a higher share of associated companies’ profits, a dilution gain from Keppel DC REIT’s private placement exercise and higher contributions from Energy Infrastructure and Environmental Infrastructure, Keppel said.

But that was partly offset by lower contributions from infrastructure services and the logistics business and the absence of a year-earlier gain from selling a stake in Keppel DC REIT, the filing said.

“In the infrastructure division, Keppel Infrastructure will continue to build on its core competencies in the energy and environment-related infrastructure as well as infrastructure services businesses to pursue promising growth areas,” the filing said.

“Keppel Telecommunications & Transportation (Keppel T&T) will continue to develop its data center business locally and overseas. Besides building complementary capabilities in the growing e-commerce business, it is transforming the logistics business from an asset-heavy business to a high performing asset-light service provider in urban logistics,” Keppel said.

Investments

The investments segment posted revenue surged more than six times on-year to S$308 million, from S$25 million in the year-ago quarter, while pretax profit rose 5 percent on-year to S$21 million. Net profit was S$1 million for the segment, down 88 percent on-year, the filing said.

The investments division revenue increased on consolidating M1 Group’s pretax profit, Keppel said.

But pretax profit for the division fell on higher net interest expense, a fair value loss on KrisEnergy warrants, compared with a fair value gain in the year-ago period, a higher share of KrisEnergy’s loss, financing and other costs from acquiring M1, partly offset by higher contributions from M1, Keppel said. It added it also saw a higher share of profit from Sino-Singapore Tianjin Eco-City.

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