ST Engineering posts 18% rise in Q1 profit

DEFENCE and engineering group Singapore Technologies Engineering (ST Engineering) posted an 18 per cent rise in first-quarter profit attributable to shareholders to S$117.7 million from S$99.9 million the year ago.

Earnings per share also climbed 18 per cent to 3.78 Singapore cents, on the back of a 9 per cent bump in revenue to S$1.65 billion.

Across the board, net profit for its aerospace, electronics, land systems and marine business sectors all rose, with the exception of its "others" business, which narrowed its losses to S$6.1 million from S$8.7 million the year ago, due mainly to contributions from associate Experia Events, the organiser behind the biennial Singapore Airshow 2018.

Its marine division, while profitable due to absence of doubtful debt provided in Q1 2017 (see amendment note), saw its revenue dented by 16 per cent, or S$29 million, falling to S$150 million, attributed to decreased revenue from both its ship building and ship repair business groups.

"The marine sector's operating environment remains challenging even as it secured various ship repair projects at its US and Singapore yards, and completed several rig repair and decommissioning works in the first quarter," ST Engineering said in its results statement.

In other sectors, the group's aerospace division posted a 6 per cent rise in net profit to S$59.2 million for Q1, due to higher gross profit on the back of higher revenue and a lower share of profits to non-controlling interests. The division announced it had secured some S$510 million worth of new contracts involving airframe heavy maintenance support, cabin interior reconfiguration and EcoPower engine wash services.

The electronics division booked a 23 per cent rise in net profit to S$40.3 million, driven by a 22 per cent rise in revenue, and increased other income, which was partially offset by higher loss from a joint venture and bigger tax expenses. It announced S$635m worth of contracts, comprising of offerings such as mobility solutions, satellite communications, public safety and security, and deployment of IoT (Internet of Things) networks and smart sensors for urban management.

ST Engineering's land systems sector delivered 34 per cent higher net profit of S$15.6 million than the previous corresponding quarter, driven by higher project revenue recognition from its automotive business group, but partially offset by lower sales from its Munitions and Weapons, as well as Services, Trading and Others business groups.

Overall commercial sales in Q1 was 63 per cent of revenue, or S$1 billion, with defence sales accounting for 37 per cent, or S$0.6 billion.

The group ended the quarter with an order book of S$13.4 billion, and expects to deliver about S$3.2 billion in the remaining months of 2018, ST Engineering said.

"We started the year with healthy revenue growth and net profit. We also secured numerous contracts including Smart City projects in the past quarter," said ST Engineering's president and chief executive Vincent Chong.

"With a strong order book, the group remains on track for steady growth," added Mr Chong.

Amendment note: A previous version of this story said that revenue for its marine division fell by 29 per cent, attributed to lower provisions for doubtful debts and weak US shipbuilding performance. The sentence has been corrected to show that revenue for ST's marine segment instead fell by S$29 million, attributed to lower revenue from its shipbuilding group, while net profit was helped by the absence of doubtful debt provided in Q1 2017.