An agreement on the proposed merger between Singapore shipyard giants Keppel Offshore & Marine and Sembcorp Marine should be reached by the end of the first quarter of 2022.
Although the companies had previously guided that definitive agreements would be achieved by the end of 2021, or early 2022, Loh Chin Hua, chief executive of Keppel Corporation, Keppel O&M’s parent, said on Thursday that it was a “highly complex” transaction and both sides were taking more time in doing due diligence.
“I think that is to be expected. We continue to believe that this is a deal that can be beneficial to all parties. So, we are working towards coming to definitive agreements by the end of the first quarter,” Loh said at Keppel Corp’s full-year 2021 results briefing at which the company reported its highest earnings in six years.
Earnings came in at SGD 1.02bn ($754m) for the 12 months to 31 December 2021, reversing losses of SGD 506m in 2020.
Keppel O&M, having returned to profitability during 2021, contributed SGD 66m to its parent's bottom line.
Keppel O&M lost a massive SGD 909m on revenue of SGD 1.57bn the previous year, much of it attributed to impairment losses as it exited the rig building sector.
Improving prospects in the oil and gas sectors saw Keppel O&M secure new orders worth SGD 3.5bn, giving it an orderbook worth SGD 5.1bn, 39% of which is for renewables and gas solutions.
Although nine major projects were delivered in 2021, Loh admitted that these were not completed without difficulty due manpower constraints caused by the pandemic, as well as supply chain issues.
“We still face challenges, but I am very confident that my colleagues will work very hard to make sure that any supply chain issues are already being thought of…in case there are further disruptions, we will find alternative sources or solutions,” he explained.
Keppel O&M chief executive Chris Ong said some projects brought in a lower gross profit as a result of continued manpower constraints, as well as lower revenue from projects which had not been completed.
“For supply chain issues, we work closely with our regular suppliers to work around issues for the present projects, such as how we make adjustments to the schedule and critical path,” Ong explained.
Ong said that while Keppel O&M’s manpower strength has dropped by six percent, the situation was manageable and activities in its yards were “going on as usual”.
“There are still challenges to bring in new labour. But because Keppel O&M’s strategy has always been agile, some projects that we newly secured are done in our overseas yards. That helps to spread out the risk and also gives our Singapore yards the opportunity to use our integration expertise.
“We are living with the limitations right now. But I think that for the ongoing projects and the projects that are newly secured, we have already factored that in,” he said.
Keppel is proposing a final dividend of SGD 0.21 per share, taking total dividends for 2021 to SGD 0.33 per share.