Keppel Corporation Full Year 2015 Report Card

Keppel Corporation posted their full year earning report in summary below. 4Q earnings decline 44% to $405 million from $726 million a year ago, as more than half of project deliveries it had planned for 2015 were pushed back to this year.

• Net Profit fall of 44% for 4Q 2015 to $405 million
• Net Profit fall of 19% for Full Year 2015 to $1.525 billion
• Earnings per Share fall 19% to 84 cents
• Annualised Return on Equity of 14.2%
• Economic Value Added decreased to $648 million
• Cash outflow of $694 million
• Net gearing was 0.53x
• Total cash dividends of 34 cents per share for FY 2015

Keppel Corporation faces a challenging environment in the coming FY 2016 on

• Falling oil prices
• Uneven recovery in major economies
• Chinese property market improving despite slowing economy
• Political and economic crises in Brazil

Keppel Corporation responding on how to handle the challenges:

Rightsizing and optimising operations

• Redeployed manpower across Keppel Offshore & Marine (O&M)
• Direct workforce lowered by about 6000 persons or 17%
• Singapore subcontract workforce lowered by about 7900 persons or 24%

Prudently investing in R&D, productivity and core competencies 

• Acquiring LETOURNEAU rig designs and aftermarket business 
• Developing and offering LNG solutions

In conclusion, Keppel Corporation is facing a tough period with the massive fall in oil price down below USD $27 per barrel. Profits had dropped to 19% thankful to their diversified business on Property sector, Infrastructure sector and Investments to balance the poor earnings on O&M sector. They are re-structuring their work force to bring down on labour cost and improve on productivity in hopping to tide over this period of crisis. They had to direct their focus on other sectors to balance their portfolio while waiting for the oil crisis to be resolved. The recovery will not be so soon but you can be sure that the oil price will not be all times low for that long. It will probably take about 2-3 years for them to recover to their peak. Meanwhile if they are constantly paying good dividend, I don't see why we should give them a miss since they are traded at all times low right now. Of course if you were to invest on them, you won't be seeing good returns from them in the next few years. If your investment time horizon is longer, you definitely can reap the rewards once they start to recover.