ST Engg Q4 profit down 30%

Full-year earnings dip to $473.6m, due to doubful debts, impairment charge

ST Engineering’s net profit for the fourth quarter ended Dec 31 has fallen 30.1 per cent to $102.3 million, from $146.4 million a year earlier.

However, sales rose 3.8 per cent year on year to $1.35 billion, from $1.3 billion in the same quarter last year.

For the full year, ST Engg made a net profit of $473.6 million, down 6 per cent from $503.5 million, even though turnover was up 6 per cent at $5.34 billion from $5.05 billion previously.

Much of the hit was due to an impairment charge of $23 million for quoted securities, while the company also made a net allowance of $32.4 million for doubtful debts.

Full-year diluted earnings per share came to 15.74 cents, down 7 per cent from 16.91 cents for FY2007. The company declared a final dividend of 12.8 cents to take full-year payout to 15.8 cents, or 100 per cent of net profit, as has been the custom.

Chief executive officer Tan Pheng Hock said that ‘definitely, the scale and size of (potential) acquisitions will affect’ future dividend payouts but said that the company, which has a triple-A rating, would prefer to take on debt for any new purchase.

Mr Tan noted that the company still had cash and cash equivalents of $1.05 billion, with net cash from operating activities of $511.4 million.

Meanwhile, the company has withdrawn all its money from fund managers, and so will not likely take any hit if markets head further south. It has also ‘very liquid’ cash parked with associated companies in the Temasek Holdings stable, which can be drawn on within two months, Mr Tan said.

All its business segments reported lower profits for the full year, except for Land Systems. Aerospace was the second-hardest hit, after Marine, with pre-tax profit falling 20 per cent, to $272.1 million.

The aerospace business accounts for about half of group earnings and had been hurt by unfavourable exchange rates, higher depreciation, more doubtful debts following the bankruptcies of two clients in the last quarter, and lower contribution from its component and engine repair/ overhaul business group.

Mr Tan said that the company’s strong order book – $10.6 billion at the end of last year, with $3.63 billion of that due this year – would afford it ‘operating leverage to weather an uncertain 2009’. However, ‘a drastic deterioration in our operating environment would affect our performance.’

Otherwise, the company expects higher sales and comparable pre-tax profits this year compared to last, he said.

Mr Tan also disclosed that ST Engg would save about $20 million from the recently announced one percentage point cut in corporate tax rates and the Jobs Credit scheme and said that there were no plans to lay off staff in Singapore.

ST Engg shed 13 cents or 5.9 per cent to close at $2.06 yesterday, its lowest since late October.

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