Brazil bribery case sinks Keppel’s profit

Singapore’s industrial conglomerate Keppel saw its full-year profit sharply cut due to the cost of the bribery settlement reached by its rig building subsidiary late in 2017.

To remind, the offshore rig building firm Keppel Offshore & Marine (KOM) in December 2017 said it would pay fines totaling $422 million (USD) to three jurisdictions to resolve charges arising out of a decade-long scheme to pay millions of dollars in bribes to officials in Brazil.

Presenting its full year and 4Q result on Thursday, Keppel reported a net profit of S$217 million for the 12 months ended 31 December 2017.

This was 72% lower than the S$784 million net profit for FY 2016, due mainly to the one-off financial penalty arising from Keppel O&M’s global resolution with criminal authorities in the United States, Brazil and Singapore, and related legal, accounting and forensics costs amounting to S$619 million.

Overall, the Group’s revenues of $6.0 billion were 12% lower as compared to 2016. This was driven largely by the 37% decrease in Offshore & Marine revenues as a result of lower
volume of work and deferment of some projects.

On a quarterly basis, the Keppel Group registered a net loss of S$495 million in 4Q 2017, compared to a net profit of S$143 million for 4Q 2016. This result too was due to the same financial penalty and related costs as well as the weaker operating results of the Offshore & Marine Division, which were partially offset by higher profits from Singapore property trading, as well as fair value gains from assets recognized during the quarter.

Loh Chin Hua, CEO of Keppel Corporation, said:” The global resolution reached by Keppel Offshore & Marine (Keppel O&M) over past misdeeds in Brazil brings an end to what has been a painful chapter for Keppel – one that we have recognized and dealt firmly with. This is not Keppel. We care not just about results, but also how they are obtained.  The Board and Management have thoroughly investigated the allegations and dealt with the issues that were uncovered. We have put in place enhanced compliance controls, including comprehensive training and certification, to prevent any repeat of such misdeeds.”

“With the issue now behind us, we look forward to continuing on our growth trajectory and building a more disciplined and sustainable business – a Keppel that will remain trusted and admired by all our stakeholders,” the CEO said.

As for the rig building division itself, the Offshore & Marine Division incurred a net loss of S$835 million for FY 2017, compared to a net profit of S$29 million for FY 2016. This was, again, mainly due to the Brazil bribery penalty and related costs, lower revenue, an additional S$81 million provision for losses on the Sete Brasil rig contracts, an impairment of S$54 million made to other assets, and a lower share of associated companies’ profits.

In 2017, the Division secured new contracts of about S$1.2 billion, mainly for LNG-related vessels, the conversion of Floating Production Storage Offloading units and newbuild dredgers.

Offshore Energy Today Staff