STEng – BT

ST Engg Q2 profit falls 2.3% to $119.9m

Aerospace business makes up 51% of group’s net earnings in second quarter

WITH mixed results across its business sectors, Singapore Technologies Engineering (ST Engg) yesterday reported net earnings of $119.9 million for the second quarter ended June 30 – 2.3 per cent down from the corresponding period last year.

Group revenue held its ground at $1.3 billion, a slight 0.2 per cent higher than a year ago.

Hit by a weaker US dollar, lower investment income, higher depreciation, higher passenger-to-freighter prototyping costs and lower associated companies’ contributions, net earnings for the aerospace sector fell 11 per cent to $61.6 million in Q2 2008.

Land systems saw net earnings drop 6 per cent to $20.6 million. Lower contributions from associated company CityCab was one reason for the fall.

In contrast, net earnings for the marine sector rose 17 per cent to $16.2 million in Q2 2008. The electronics sector raked in net earnings of $21.1 million, 6 per cent more year on year.

ST Engg’s earnings per share was 4.01 cents in Q2 2008, 0.15 cents lower than in the year-ago period.

The group declared an interim dividend of three cents per share.

‘Our diversity helps us,’ said ST Engg’s president and CEO Tan Pheng Hock, referring to the group’s customer base and activities across business sectors and geographical regions.

Order book for the group grew by another $100 million in the second quarter to $9.29 billion as at end-June, of which some $2.14 billion would be delivered in H2 2008.

But attention at yesterday’s results briefing was centred on the aerospace business, which made up 51 per cent of the group’s net earnings in Q2 2008.

‘We have tier one customers and . . . (they) are more particular about performance and quality than about prices,’ said ST Aerospace’s president Tan Kok Khiang, when asked about the sector’s margins in today’s environment.

While the business climate may be bleaker, there are acquisition opportunities for ST Engg in areas such as the United States, Europe, China and Vietnam. ‘Valuations are definitely more reasonable,’ said group president and CEO Mr Tan.

But he added: ‘We want to ensure that we buy companies that are not in trouble, companies that are able to add value to us strategically.’

Results for ST Engg were stronger when viewed on a half-year basis. The group turned in net earnings of $242.5 million, up 4.7 per cent from a year ago. Revenue increased by 3.9 per cent to $2.62 billion.

ST Engg expects turnover and profit before tax to be ‘modestly higher’ in H2 2008 compared with the first half. As for FY 2008, profit before tax could be comparable to the previous year’s.

ST Engg shares closed unchanged at $2.80 yesterday.

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