Keppel O&M, the offshore business of Keppel Corp, reported a loss of SGD3.39m ($2.42m) for the first three months, as against the profit of SGD107.98m in the same period of last year.
Loh Chin Hua, ceo of Keppel Corp, said the “very challenging” offshore market is due to, among other factors, the oversupply of rigs and OSVs. “It will take some time before the industry fully recovers,” Loh said.
Keppel O&M recorded a first quarter revenue of SGD483.39m, down 40.9% year-on-year, and an operating profit of SGD3.74m, a significant plunge compared to the operating profit of SGD110.83m in the year-ago period.
“While the division continued to make a profit at the gross operating level, it was insufficient to cover our fixed costs,” Loh said, adding that rightsizing efforts since early 2015 have been important to ensure operational sustainability.
During the first quarter, Keppel O&M further reduced its global direct workforce by about 1,250 or 6% compared to the previous quarter, through natural attrition, early termination of contracts and retrenchments.
Since the start of 2015, the division has slashed global direct workforce by close to 18,000 or about 49%.
Apart from workforce reduction, Keppel O&M has also ceased operations at a yard at Shipyard Road in Singapore and returned the land to the government at the end of March. Two other yards will be closed later this year. The closure of the three Singapore yards were revealed at Keppel Corp’s 2016 full year results announcement.
The net orderbook of Keppel O&M stood at SGD3.5bn as at 31 March 2017, excluding the rig orders from one of its biggest customer Sete Brasil, which filed for bankruptcy protection last year amid a corruption scandal.
Looking ahead, Loh said Keppel O&M is pushing into new markets and revenue sources. “Gas will be an important market of the future, and we are priming Keppel O&M to be an industry leader with an extensive gas strategy that spans the value chain,” he said.
“We are also re-purposing our offshore technology for applications in other areas including floating infrastructure assets.”