STEng – BT

ST Engg Q3 profit rises 2.7% to $133.8m

Revenue slides 6.2% to $1.39b; EPS rises to 4.39 cents

SINGAPORE Technologies Engineering (ST Engineering) chalked up a 2.7 per cent rise in third-quarter net profit to $133.8 million, from $130.2 million a year ago, despite a fall in revenue.

The group’s revenue slid 6.2 per cent, from $1.49 billion to $1.39 billion, for the three months ended Sept 30, 2011. But gross profit margin rose as cost of sales fell 8.7 per cent.

Except for its marine sector which had comparable revenue, the rest of its sectors – aerospace, electronics, and land systems – registered lower revenue compared to Q3 2010.

For the nine months ended Sept 30, ST Engineering’s net profit attributable to shareholders rose 8.2 per cent year on year to $375.4 million, while revenue rose 1.8 per cent to $4.4 billion.

Earnings per share (EPS) for the group rose to 4.39 cents for Q3 2011, up from 4.31 cents a year ago.

No interim dividend was recommended for the quarter.

The group’s profit before tax (PBT) of $165.9 million in Q3 2011 was 3.8 per cent higher than Q3 2010’s PBT of $159.8 million.

All sectors recorded higher PBT except for Land Systems, where PBT dropped 46 per cent due to lower revenue and higher operating expenses. Aerospace posted a 20 per cent growth in PBT, mainly due to write-back of allowance for inventory obsolescence following the revised inventory allowance estimates, lower finance costs, and higher contribution from associates.

However, these were partially offset by higher administrative expenses.

ST Engineering had ‘revised the obsolescence rates to align more closely with the industry practices’. The effect of this change for its four sectors resulted in a write-back allowance for inventory obsolescence of $19 million to its income statement.

Electronics PBT in Q3 2011 increased 15 per cent thanks to favourable sales mix, better contribution from satellite communication product sales, and write-back of allowance for stock obsolescence. These were partially offset by the impairment in value of intangible assets and higher operating expenses.

Marine PBT improved 7 per cent, due to higher write-back allowance for doubtful debts and higher other income, but these were partially offset by lower gross profit due to unfavourable sales mix.

ST Engineering president and chief executive officer Tan Pheng Hock said: ‘The group continues to secure orders and grow its order backlog to $11 billion at the end of the quarter despite the challenging environment.’

‘Barring unforeseen circumstances, the group expects to achieve revenue and PBT for FY 2011 comparable to FY 2010.’

ST Engineering gained four cents to close at $2.85 yesterday, before its results were out.

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