STEng – BT

ST Engg Q2 profit drops 9.4% to $108.7m

It expects to achieve higher revenue and pre-tax profit in H2

SINGAPORE Technologies (ST) Engineering’s net profit for the second quarter fell 9.4 per cent to $108.7 million, from $119.9 million a year ago. This was despite an 8.3 per cent rise in turnover to $1.4 billion for the three months ended June 30.

The defence and aerospace group said that the year-on-year revenue rise was attributable to higher turnover from its electronics, marine and aerospace divisions, which offset the land systems sector’s lower turnover for the quarter.

But lower profit before tax from both its aerospace and land systems sectors offset growth in profits from the electronics and marine sectors.

The aerospace sector’s profit before tax fell 18 per cent to $60.9 million due to unfavourable sales mix and the US dollar exchange rate, while the land systems division’s profit fell a sharper 32 per cent to $17.2 million due to lower turnover, product mix and higher operating expenses.

Land systems’ revenue fell due to lower export deliveries of its munitions and weapons business, the group said.

The marine and electronics sectors saw pre-tax profit growth of 19 per cent to $24.3 million and 12 per cent to $32.9 million respectively.

During the second quarter, key order-book deliveries which contributed to higher revenue overall included more 757 passenger-to-freighter conversion redeliveries, milestone completions of communications and MRT projects, higher specialty vehicle sales, and favourable sales mix for shipbuilding.

ST Engineering’s order book stood at $10.74 billion as at June 30, of which $2.06 billion is expected to be delivered in the second half of this year.

Chief executive officer Tan Pheng Hock said at the group’s results briefing yesterday that ST Engineering ‘is not a seasonal stock’ and that as its revenue is order-book driven, comparisons with Q2 2008 may not reflect its performance.

When measured against Q1’s results, for instance, ST Engineering posted a 7 per cent increase in turnover and 28 per cent growth in net profit in the second quarter.

Comparing H1 2009 to H1 2008, the first half of this year registered 4.3 per cent revenue growth to $2.7 billion, while net profit fell 20 per cent to $193.9 million.

The group expects to achieve higher revenue and pre-tax profit in the second half of this year.

Mr Tan said: ‘Barring unforeseen circumstances, the group expects to achieve comparable turnover and profit before tax for FY 2009 over FY 2008.’

The group received $9.8 million from the government’s Jobs Credit Scheme in the second quarter.

ST Engineering had total borrowings of $897.5 million at the end of the quarter, compared with $881.4 million on Dec 31.

But the amount repayable within a year fell to $234 million, from $586.7 million three months before.

Its cash and cash equivalents at June 30 totalled $1.08 billion, $133 million higher than it had been at the end of Q2 last year.

The group’s total comprehensive income of $63.7 million attributable to shareholders was a 42.6 per cent drop from Q2 last year. But for the first half of this year, total comprehensive income rose 2.7 per cent to $190.8 million.

Earnings per share for the second quarter fell to 3.62 cents, from 4.01 cents in Q2 2008. Net asset value per share at the end of the second quarter was 46.7 cents, against 47 cents a year back.

ST Engineering’s board has approved an interim ordinary dividend of three cents a share, payable on Sept 10. The counter closed unchanged at $2.63 a share yesterday.

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