Keppel to exit rig-building business, yet to confirm how many jobs will be cut

Keppel O&M's yard operations will be streamlined, including repurposing or divesting part of its global network of yards.
Keppel O&M's yard operations will be streamlined, including repurposing or divesting part of its global network of yards.PHOTO: KEPPEL CORP

SINGAPORE (REUTERS, THE BUSINESS TIMES) - Keppel Corp said on Thursday (Jan 28) that its struggling offshore and marine (O&M) segment will exit the rig-building business and shift its focus to infrastructure projects, including renewable energy.

The O&M business will focus on design, engineering and procurement. It will have a "significantly reduced headcount" and its network of yards will be repurposed or divested, Keppel said.

"When we succeed in executing these plans, we will see a transformed and more competitive Keppel O&M, well placed to support the global energy transition," CEO Loh Chin Hua said during a briefing on the results.

The company said it could not yet estimate how many jobs would be cut, but that some employees will be retrained.

As Keppel outlined details of a previously flagged strategic review, it said it would seek opportunities in floating infrastructure and infrastructure-like projects that can deliver more predictable streams of cashflow, including projects in renewable energy and hydrogen.

The restructuring of the business, which has a current headcount of 10,500, is expected to be executed over the next two to three years and existing rigs under construction will be completed.

Keppel, which counts Singapore state investor Temasek as its biggest shareholder, said it was also exploring inorganic options for the O&M business.

The company will be restructured into three parts, separating construction and ownership of legacy drilling rig assets from its core operations, which will be "slimmer, asset-light and people-light". 

As for the logistics business, Keppel has decided to sharpen its focus and divest its logistics and channel management business to a third party, which may be able to provide a better ecosystem to scale up this business, said Mr Loh.

Keppel T&T has appointed a financial adviser, who is now engaging potential buyers, he added.

Keppel and its smaller rival, Sembcorp Marine, were among the world's biggest oil rig-builders, but low oil prices and an oversupply of rigs have hit the business hard.

The company, whose businesses include property development and telecommunications, separately on Thursday reported a net loss of $506 million for 2020, compared with a net profit of $707 million a year earlier.

Its full-year results included impairments of $952 million mainly due to the O&M business, the bulk of which was recognised in the second quarter.

Revenue for financial year 2020 was down 13.3 per cent to $6.57 billion, mostly due to lower contributions from the energy and environment, urban development and asset management segments, offset by higher revenue from connectivity.

For the second half of 2020, Keppel made a net profit of $31.3 million, down 91.1 per cent from a year ago, on the back of decreased contributions across segments, with energy and environment hard hit in particular. Revenue fell 20.5 per cent to $3.39 billion.

Earnings per share (EPS) for the second half of 2020 was 1.7 cents, down 91 per cent from 19.3 cents in the same period a year ago.

For the full year, loss per share was 27.8 cents, compared with EPS of 38.9 cents the previous year.

A final cash dividend of seven cents was declared for financial year 2020, down from 12 cents previously.

Keppel's shares closed at $5.46, down 12 cents or 2.15 per cent prior to the announcement.