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Keppel Corporation has announced a reduction in its direct workforce by about 8,000 (about 26%) in its offshore and marine (O&M) business.
According to a press release, the workforce reduction took place in the from January to September 2016 with the conglomerate reduced its headcount by about 3,080 in the O&M business – around 600 in Singapore and 2,420 in its overseas yards.
“Much of the reduction has so far been through natural attrition. However, we will increasingly also look into early termination of contracts and selective retrenchment in Singapore, in line with the drop in workload, while ensuring that Keppel O&M continues to retain its core capabilities,” Loh Chin Hua, chief executive officer, Keppel Corporation said when revealing the organisation’s unaudited results for the third quarter of 2016.
He further noted: “Other parts of the Keppel Group are still growing and are in need of good people, especially those with strong engineering and project management expertise. Where possible, we will look to redeploy displaced talents to other business units within the Group.”
In light of the challenging O&M landscape, senior management across Keppel’s business units have also voluntarily taken a reduction in their monthly salary as the organisation prepare for an extended period of weaker demand for new oil rigs
Loh said: “In the short term, painful measures which have kept Keppel O&M profitable despite the sharp drop in revenues and operating profits will have to continue. Reflecting our solidarity as OneKeppel, senior management across all the Keppel business units have voluntarily taken a reduction in our monthly salary.
“The Directors of Keppel Corporation will also be proposing lower directors’ fees for 2016 at next year’s AGM. Whilst Keppel remains profitable, the voluntary cuts by Directors and senior management demonstrate our determination to hunker down, and deal squarely with the challenges we face. It is also the right thing to do, given the hard measures we have taken to rightsize our O&M Division and the sacrifices that our stakeholders have to make.”
He pointed out that the business is not just cutting costs and surviving the downturn in the offshore industry, but is also investing prudently in new capabilities and exploring new markets and opportunities.
“Our aim, as always, is to emerge from this downturn stronger. We are looking at re-purposing the technology that we have developed in the offshore industry for other uses such as floating power plants and floating desalination plants. We expect that our O&M business will be increasingly diversified beyond just oil and gas,” he added.
In a more positive note, despite the strong headwinds affecting the O&M industry, Keppel O&M has remained profitable as other divisions in the Keppel Group continue to bolster the group’s earnings. Notable divisions include its property business which is now the largest contributor, its infrastructure business which has been providing steady recurring income, and its data centre and asset management businesses serving as new areas of growth.
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