Keppel Offshore & Marine to cut jobs amid Covid-19 fallout

More jobs are set to be lost at Singaporean fabricator Keppel Offshore & Marine amid the fallout of the coronavirus pandemic and resulting commodity prices.

Keppel Corporation chief executive Loh Chin Hua on Thursday warned that, 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”.

To this end, the boss and management of Keppel O&M have volunteered to take base salary reductions of between 5% and 10% “as a demonstration of collective resolve and to set the tone from the top”.

In solidarity with Keppel O&M, the senior executive management of Keppel Corporation will also take a base salary reduction of between 5% and 10%, while the directors of Keppel Corporation and Keppel O&M will take a 10% reduction in their annual fees.

As a result of Covid-19 and measures to contain its spread, the contractor’s local workforce was reduced to about 1200 persons for most of the second quarter, from about 24,000 in March. The workforce has since risen to a current level of about 5000.

The company did not disclose how many jobs might now be lost.

As of end-June 2020, Keppel O&M’s net order book stood at S$3.5 billion (US$2.545 billion), which is expected to keep the division busy for at least two years. In the year to date, the O&M Division has secured S$107 million-worth of offshore wind and floating production, storage and offloading vessel projects .

Keppel’s offshore and marine division on Thursday reported a net loss of S$959 million for the first half of 2020, compared to a net profit of S$10 million one year ago.

Parent posts loss

Meanwhile, parent Keppel Corporation posted a net S$537 million net loss for the first half of 2020 due to impairments of the company’s offshore and marine division.

The S$930 million of impairments mainly relate to Keppel Offshore & Marine’s stranded assets, receivables, stocks and share of impairment provisions from Floatel.

“Notwithstanding Covid-19, most of Keppel’s businesses have remained resilient, underpinned by the essential services that we provide. 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,” said Loh.

“Without the impairments, Keppel’s net profit for the first half of 2020 would have been higher year-on-year, even after including the loss of S$69 million by Keppel Offshore & Marine.”

Excluding these impairments, the group would have registered a S$393 million net profit for the six months ended 30 June – up 5% year-on-year.

The group’s first half revenues totalled S$3.182 billion, down slightly from the same period of 2019.

Lower contributions from property trading projects in China, power and gas sales, environmental engineering projects and asset management were partially offset by higher revenues from offshore and marine projects.

Keppel was in the black in the second quarter to the tune of S$697 million, compared to a net profit of S$153 million for those three months of 2019, mainly due to impairments and weaker performance by the offshore and marine business.

“We will forge ahead in this difficult landscape, guided by our Vision 2030, a long-term roadmap which transcends the current crisis,” added Loh.