Keppel Offshore and Marine (Keppel O&M) slumped into a heavy loss in the second quarter due to impairments and weak business performance amid the Covid-19 pandemic.
The report comes less than a week after parent Keppel Corp warned that it would report a significant adverse impact as Covid-19 hit its business.
Keppel O&M, one of the world’s largest rig builders and repair yards, recorded a net loss of SGD 962m ($700m) compared with a profit of SGD 4m in the same period of 2019.
Keppel O&M's revenue fell to SGD 270m from SGD 481m, according to a quarterly report.
To control the spread of Covid-19, the company was forced to reduce its labour force in Singapore from 24,000 workers in March to 1,200 for most of the second quarter. The headcount has since risen to about 5,000 currently.
Amid the general weakness in the offshore shipbuilding industry due to a weak oil price, Keppel O&M recorded SGD 431m impairments for contract assets and SGD 179m for doubtful debt.
Keppel Corp, the Singapore-listed conglomerate that owns Keppel O&M, separately booked SGD 227m impairments for investments in offshore accommodation vessels of Floatel International.
“Against this challenging backdrop, further rightsizing will be required at Keppel O&M to ensure that its fixed overhead costs can be brought down in line with the realities for the industry,” Keppel Corp said.
As part of the group efforts to cut headcount costs, the chief executives and management teams of both Keppel Corp and Keppel O&M have taken a base salary reduction of between 5% and 10%.
Their directors will also take a 10% cut in their annual fees.
Keppel O&M's net orderbook stood at SGD 3.5m as of the end of June, which is expected to keep it “busy for at least two years”, according to the report.
So far this year, the company has secured SGD 107m worth of offshore wind and floating production, storage and offloading projects.
Group performance
Keppel Corp, which also owns property, infrastructure and some other businesses, saw group-wide revenues slide to SGD 1.33bn in the second quarter from SGD 1.78bn in the corresponding period of last year.
Mainly due to the offshore woes, the company flipped into a net loss of SGD 697m — including SGD 919m impairments — from a profit of SGD 153m.
“Notwithstanding Covid-19, most of Keppel’s businesses have remained resilient, underpinned by the essential services that we provide,” Keppel chief executive Loh Chin Hu said.
“However, due to the impact of the pandemic on the global economy and oil prices, we had to take significant impairments related to the offshore and marine business.”
