No money from Brazil means no work by Keppel

Bloomberg

Keppel Corp., the world’s largest builder of oil rigs, said it won’t resume work for a key Brazilian client until the customer restarts making payments on its orders.
Sete Brasil Participacoes SA, embroiled in a corruption probe known in Brazil as Lava Jato and debating whether it should file for bankruptcy, stopped paying Keppel last year on its orders for rigs. Keppel announced a S$230 million ($170 million) charge in January on the delinquent projects.
CIMB Group Holdings Bhd. and UOB-Kay Hian Holdings Ltd. cut their rating on Keppel’s stock to hold after the company reported a 41 percent drop in net income Monday and warned it may face an extended period of weak orders. Dilma Rousseff’s Brazilian presidency is hanging by a thread amid a two-year corruption investigation known as Lava Jato, or Carwash, that has paralyzed Congress and deepened the worst recession in over a century.
Brazil, traditionally one of the key markets for Keppel’s offshore business, “continues to be mired in political and economic challenges as well as the Lava Jato scandal,” CEO Loh Chin Hua said during a webcast Monday. “Globally, we’re seeing layoffs, mergers as well as large reductions in capital expenditure as the industry prepares for a long winter.”

Smaller Workforce
Keppel, which has been cutting employees, said its global workforce has been further reduced by 9.4%, or about 2,800 positions, since the start of 2016. Should there be a need for further “right-sizing,” the company will do so, Loh said. Keppel stopped construction on Sete Brasil’s rigs since the end of 2015, the CEO said. Sete Brasil accounts for a combined $10.5 billion in orders for semi-submersibles and drill ships at Keppel and Sembcorp Marine Ltd., the world’s two largest builders of oil rigs. The rig division faces a “prolonged period” in which orders “will not be high,” Chow Yew Yuen, chief executive officer of Keppel Offshore & Marine Ltd., the company’s largest business, said during the webcast.