ST Engg – BT

STE Q2 earnings rise 12% to $122.8m

HELPED by strong performance in the aerospace and land systems divisions, Singapore Technologies Engineering (STE) yesterday posted a 12 per cent year-on-year increase in second-quarter net profits to $122.8 million. Revenue for the three months to June 30 grew 22 per cent to $1.3 billion, helped by growth in all four divisions.

First-half net profit was 16.8 per cent higher at $231.6 million and revenue rose 21.7 per cent to $2.52 billion. H1 earnings per share was 7.84 cents, up from 6.78, and the board approved an interim dividend of 2 cents per share.

The group’s net profit margin for the second quarter declined due to a fall in investment and other income, according to acting chief financial officer Raphael Chin. Earnings before interest and tax (Ebit) actually rose by 39 per cent.

STE’s order book stood at $9.56 billion at the end of June 2007, slightly lower than a quarter ago. About $1.88 billion of this will be delivered in 2H07.

‘We are in a very strong position at this point,’ said chief executive Tan Pheng Hock. ‘You should be surprised that despite us having no major contract announcements last quarter the order book went down only marginally.’

STE’s aerospace unit saw second-quarter revenue rise 11 per cent year-on-year to $490 million, while net profit rose 14 per cent to $69.5 million.

SAS Component, a Denmark-based aircraft components unit acquired almost two years ago, turned profitable in 2Q07, said Mr Tan. It is the last of STE’s recent acquisitions to do so. The division also started expanding facilities and services – it is adding three hangars at Pudong International Airport in Shanghai and one at Seletar in Singapore.

The electronics arm saw revenues rise 29 per cent to $270 million, while net profits rose 2 per cent to $19.9 million. However, Mr Tan said this was due to a gain on investment last year – the unit’s Ebit actually rose by over 50 per cent.

Land Systems saw revenue rise 37 per cent to $285 million, while net profit more than doubled to $22 million. This was thanks to stronger deliveries of defence vehicles like the Bionix II and Bronco and of specialty vehicles like construction equipment and trucks.

ST Marine grew revenue 32 per cent to $220 million, while net profit declined 11 per cent to $13.9 million.

The group maintains its guidance of higher full-year turnover and pre-tax profit. It also expects revenue and profit before tax for the second half to be higher than those in the first.

Mr Tan said the group plans to invest in research and development on products, which will raise expenses.

He also said the US’ sub-prime worries do not directly affect STE’s operations there, except VT LeeBoy, which sells vehicles used to pave peripheral roads in housing estates. ‘It will definitely impact the LeeBoy business, but not a lot.’

But the credit crunch also means STE’s triple-A credit rating is ‘especially valuable’, he said. ‘It is a card not many people carry and means that we can borrow very cheap.’

Leave a Reply