Frencken Q1 net profit up 27.2% to S$8.6m on industrial automation sales

MAINBOARD-LISTED technology solutions provider Frencken Group has posted a double-digit jump in first-quarter earnings, as sales in the seasonal industrial automation segment made up for the slump in semiconductor-related revenues.

Net profit came in 27.2 per cent higher for the three months to March 31 at S$8.6 million, on a 14.7 per cent year-on-year increase in turnover to S$159.1 million, it announced on Thursday.

Revenue in the core mechatronics division was driven by contributions from industrial automation sales, which surged from S$14.3 million to S$42 million on storage drive production equipment orders from what Frencken described as "a key multinational customer in Asia".

Similar demand is expected to drive industrial automation revenues in the second quarter, said the company, notwithstanding the "typically lumpy" nature of the segment.

Frencken also got a lift from its analytical segment, where sales rose by 11.3 per cent to S$36 million, on more orders from a European client, thanks to end-user demand.

These gains helped to offset the decline in the semiconductor segment, which had clocked the biggest share of sales in the same period the previous year.

This time round, sales were down by 26.6 per cent to S$26.4 million, which Frencken attributed to the general industry slowdown globally. Revenue in this segment is likely to slide again in the second quarter, amid a cyclical downturn, the group added.

Still, it noted that "a decline in orders for products related to back-end equipment was partially buffered by increased sales from new product introductions projects for front-end semiconductor equipment" and this trend is expected to continue.

Earnings per share rose to 2.04 Singapore cents, up from 1.62 cents before.

Meanwhile, the group's net asset value was 64.89 Singapore cents a share, against 62.84 cents as at Dec 31, 2018.

Frencken said in its outlook statement that it was "confident of its long-term business prospects", citing the potential of technologies such as cloud computing, artificial intelligence and the Internet of Things to grow the sector worldwide.

"To move up the value chain and remain in sync with customers' future demand trends, the mechatronics division is embarking on a strategy to evolve its business from a "build to print" model into a "build to spec" or "original design manufacturer" model," it added.

No dividend was recommended, unchanged from the same period the previous year.

Frencken closed flat at S$0.615 on Thursday before the results were released.