Keppel Corporation (SGX: BN4) Posts First Loss In Over 20 Years

Keppel Corporation Limited (SGX: BN4), a well-known Singapore blue-chip conglomerate, with four main business segments — Energy & Environment, Urban Development, Connectivity, and Asset Management.

The group just announced its 2020 financial results.

Without further ado, let’s dive into Keppel’s earnings to see how it performed for the year and its plans going forward.

TL;DR: Keppel’s Business Hit By Industry Headwinds 

• Keppel’s 2020 revenue falls 13.3% year-on-year to S$6.6 billion.
• The group goes into a net loss of S$506 million, compared to a net profit of S$707 a year ago.
• Keppel’s oil and marine (O&M) business has been severely impacted by the pandemic and the fall in global demand for oil.
• Total dividend for 2020 at S$0.10 per share, down from S$0.20 per share in 2019.
• Keppel’s O&M business will be undergoing restructuring.

Keppel’s 2020 Financial Highlights

For the year, Keppel’s revenue tumbled 13.3% year-on-year to S$6.6 billion.

The fall was largely on the back of lower contributions from its Energy & Environment, Urban Development and Asset Management segments, offset by higher revenue from Connectivity.

Keppel’s offshore and marine (O&M) business falls under the Energy & Environment segment.

Due to impairments at its O&M business, Keppel reported a net loss of S$505.9 million for 2020, compared to a net profit of S$707.0 million a year ago.

The O&M business was severely affected by the pandemic and the fall in global demand for oil.

The last time Keppel had a loss goes back many years to 1998, around the time of the Asian Financial Crisis, according to Keppel’s chief financial officer.

Excluding impairments in both 2020 and 2019, Keppel would have registered a net profit of S$446 million.

Apart from the O&M business, all key business units of Keppel were profitable in 2020.

Keppel’s balance sheet just got weaker.

As of 30 December 2020, Keppel had a cash balance of S$2.5 billion and S$12.6 billion in total debt. This translates to a net debt position of S$10.1 billion.

Gearing wise, Keppel’s net gearing ratio stood at 0.91x, an increase from 0.85x a year ago.

Keppel’s 2020 Dividend

Keppel declared a final dividend of 7.0 Singapore cents per share for 2020.

Including the interim dividend of 3.0 cents already paid, the total dividend for 2020 would be 10.0 cents per share.

In comparison, for 2019, Keppel dished out a total dividend of 20.0 Singapore cents per share.

Keppel’s total dividends have been trending down over the years.

In 2014, it paid out 48.0 cents per share in dividends, but that slipped to 30.0 cents in 2018.

Keppel Going Forward

Keppel also announced a restructuring of its O&M business “to ensure that it is relevant, competitive and well-placed to support the global energy transition”, and better align itself to Keppel’s Vision 2030.

Keppel O&M will exit the offshore rig building business, after completing the existing rigs under construction.

It will not undertake any new project needing large upfront capital expenditure or without milestone payments.

It will also progressively exit low value-adding repairs and other activities with low earnings contribution, and focus on higher value-adding work.

Keppel’s logistics business, under Keppel T&T, will also undergo a review.

Even though Keppel T&T has benefitted from the e-commerce boom brought about by COVID-19, the group has decided to sharpen its focus and divest its logistics and channel management business to a third party.

Keppel’s shares are now changing hands at S$5.08 each, down around 7% from yesterday’s close.

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