Keppel pledges to protect dividends from 'one-off' Brazil bribery fine

SINGAPORE - 24 December 2017: Singapore’s Keppel Corp Ltd (KPLM.SI) said the impact of a mammoth fine borne by its offshore unit will be a ‘one-off’ in this year’s earnings and will not impact dividends, as analysts predicted a share-price slump when markets reopen on Tuesday.

Keppel’s offshore rig-building business agreed to pay the combined penalty to resolve investigations into charges it bribed Brazilian officials by authorities in the United States, Brazil and its home country of Singapore, U.S. authorities said on Friday.

Singapore authorities said investigations in respect of the individuals involved are ongoing.

Keppel said in a statement on Saturday that it would make provision for the fines in the current financial year, but that the impact on its profit-and-loss statement is a “one-off” and it will “ringfence” the penalty when considering this year’s final dividend.

“In the short term, it will still be negative for the share price,” said KGI Securities Singapore analyst Joel Ng.

“They say they will ringfence this one-off item ... but given that it is quite a huge amount, I think dividends will definitely take a hit.”

The final proposed dividend will be announced at Keppel’s full-year results in January 2018.

Keppel estimated that had the fines been imposed on Jan. 1 2016, its earnings per share for the year through December 2016 would have decreased from 43.2 cents to 11.7 cents.

“In the near term it (the fine) is going to have some negative impact on the share price. It is a significant amount and it will have a material impact to the earnings,” said Margaret Yang an analyst with CMC Markets in Singapore.

“In the long term, it depends on how the company can fix their public image.”

Both Ng and Yang said Keppel’s peer Sembcorp Marine Ltd (SCMN.SI) could also see its share price drop when markets reopen after the Christmas break on Tuesday.

Sembcorp Marine was also named among foreign companies that have done business with people who are under investigation in Brazil as part of a massive corruption investigation involving the country's state-run oil company Petrobras. (reut.rs/2pqXysy)

Keppel’s shares closed up 0.2 percent on Friday at S$7.47 before the U.S. announcement was made.