(Bloomberg) — Keppel Corp., which has already eliminated more than a quarter of its workforce this year, said "painful measures" and job cuts will continue as profit at the world’s biggest oil-rig builder drops.
Senior managers at the Singapore-based company have taken a cut in their monthly pay and directors will propose lower fees, Keppel said in a stock exchange statement Thursday. Keppel, which also builds properties, slashed workforce at its offshore and marine business 26%, or about 8,000 jobs, in the nine months through September.
Oil-rig makers like Keppel and its closest rival Sembcorp Marine Ltd. and ship builders have fired thousands of workers in the past two years and are planning more cuts amid weak demand for equipment to explore and transport oil. Companies in the oil and natural gas sector have slashed more than 350,000 jobs since crude prices started to fall in 2014 and explorers slashed hundreds of billions of dollars in investment to weather the rout.
"Given that our expectations are that the market is going to be slow for the foreseeable future, we have to continue to rightsize," Keppel Chief Executive Officer Loh Chin Hua said Thursday. "We have been relying on natural attrition until now. So going forward, we have to look at ending contracts a bit earlier and possibly look at retrenchment."
Shares of Keppel rose 0.4 to close at S$5.44 in Singapore before the earnings announcement. The stock has fallen 16% this year, the second-worst performer on the 30-member Straits Times Index.
Keppel’s comments came after the company Thursday reported third-quarter net income dropped 38% on year to S$224.5 million ($162 million), mainly because of the difficulties at its offshore and marine sector.
Profit at the real-estate business of Keppel jumped 23% to S$157 million, according to a statement to the stock exchange. The offshore marine unit’s net income tumbled 93% to S$11 million.
Keppel is looking at cutting yard capacity by scrapping some facilities, Keppel Offshore & Marine CEO Chow Yew Yuen said in a post-earnings webcast Thursday. The company is on track to deliver four more projects in the current quarter and Keppel received no deferment requests last quarter, he said.
Keppel has also been hit by non-payment by one of its biggest clients, Sete Brasil Participacoes SA, which filed for bankruptcy protection in April. A provision of S$230 million it made earlier is “adequate,” Keppel said Thursday.
Demand in the offshore and marine market will remain tepid despite a recovery in oil to above $50 a barrel because of oversupply, Loh said.
“Rightsizing of our offshore and marine business will continue as we prepare for an extended period of weaker demand for new oil rigs,” Loh said. “Our aim has always been to emerge from this downturn stronger.”
Bloomberg News by Kyunghee Park