Keppel to exit rig-building, reduce headcount in O&M business

Keppel Corp's struggling offshore and marine (O&M) segment will exit the rig-building business and shift its focus to offshore 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," chief executive 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 cash flow, 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, whose biggest shareholder is Temasek, said it was also "exploring inorganic options" for the O&M business.

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 Telecommunications & Transportation 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 crude prices and an oversupply have hit the business hard.

Keppel Corp, whose businesses include property development and telecommunications, separately reported yesterday that full-year net loss for last year came in at $506 million 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.

Keppel made a net profit of $31.3 million in the second half, down 91.1 per cent from a year ago on lower contributions across segments.

REUTERS, THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on January 29, 2021, with the headline 'Keppel to exit rig-building, reduce headcount in O&M business'. Subscribe