Keppel suffers a disastrous 52.5% profit crash

But bosses are still ''happy''.

According to OCBC Investment Research, Keppel Corporation (KEP) reported a 35.3% YoY decrease in revenue to S$2.76b and a 52.5% drop in net profit to S$357.0m in 1QFY13. However, net profit in 1QFY12 was bumped up by lumpy contributions from Reflections at Keppel Bay. 

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Excluding Reflections, we estimate revenue fell by about 7% YoY while net profit slipped 16%.

Results were within our expectations, with both revenue and net profit forming 21% of our full year estimates.

Though the 14.1% operating margin in the O&M segment in 1Q13 was lower than 1Q12’s 15.1%, it is higher than the 13.5% seen in 4Q12, and management is happy with the performance.

A main reason for this is because the group has been executing orders of similar designs, resulting in more efficiency after the initial learning curve.

Meanwhile, management is sticking to its margin guidance of 10-12%, and as mentioned in our earlier reports, we believe that there is room for productivity and efficiency gains which may result in betterthan-expected margins.

Finally, management “does not necessarily expect” margins to fall when the profit recognition of its Sete Brasil semi-subs kicks in, which we find encouraging.

The group is still seeing “strong market interest” in its core products. Seven KFELS B Class jackups have been ordered YTD, and there are sustained enquiries for semisubmersibles.

Meanwhile, execution is smooth with all five rigs delivered in 1Q13 ahead of schedule, resulting in a total bonus of S$5m for the group. KEP will be delivering a record of 20 jackups this year, a first for any yard worldwide.

Keppel’s O&M division has secured orders worth about S$2.1b YTD, accounting for 43% of our full year win estimate. Its net order book has increased from S$12.8b as at end Dec to S$13.1b as at end Mar, with deliveries extending into 2019, providing good revenue visibility.