ST Engineering expects around 10% decline in full-year revenue

MAINBOARD-LISTED ST Engineering expects full-year revenue to be around 10 per cent lower for FY2020 than in FY2019, it said in its third-quarter business update on Wednesday.

ST Engineering had previously provided revenue guidance in August that FY2020 revenue was expected to be between 5 per cent and 15 per cent lower than FY2019. It said in the exchange filing on Wednesday that group revenue performance to date remained within the guidance, and the expectation was now for revenue to be close to the midpoint of its earlier guidance.

For its aerospace segment, ST Engineering said that a faster recovering domestic travel sector augurs well for its narrowbody maintenance repair and overhaul (MRO) work.

It also said it is pursuing passenger-to-freighter conversion opportunities, as there is market demand for dedicated freight aircraft, given limited passenger flights with belly load capacity. ST Engineering also noted that fleet retirements of passenger planes have added to feedstock availability.

It secured around S$600 million in aerospace orders for the quarter, taking the total for the first nine months of 2020 to about S$2 billion.

ST Engineering also secured around S$1.1 billion in new orders for its electronics segment in the third quarter, taking its nine-month total to S$2.3 billion. The orders include rail electronics projects, smart digital building solutions, and defence and public security projects.

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ST Engineering said its full workforce is back at its Singapore yards for the marine sector, and it completed numerous ship repair projects, rig repair and related fabrication works.

It added that its defence land platform business remains steady. However, it noted that tenders for road construction and specialty vehicles are on hold.

As at September 2020, its order book stood at S$15.8 billion, slightly lower than the S$15.9 billion in June.

ST Engineering said it will focus on opportunities to capitalise on new demand arising from Covid-19, such as cybersecurity and sensors. It also has group-wide efficiency and productivity initiatives on track to target to offset the effect of lower level of government support in 2021.

The group announced on Tuesday evening that it will be reorganised into two main clusters from the new year - Commercial, and Defence & Public Security. These two clusters replace the sector structure of Aerospace, Electronics, Land Systems and Marine.

The Commercial cluster will drive the group's international growth in commercial aerospace, urban solutions and satellite communications. This cluster integrates the group's smart-city technologies and capabilities, which now reside in the four sectors, into one unit.

The Defence & Public cluster will be made up of four business areas - digital systems and cyber, land systems, marine and defence aerospace. This cluster will focus on serving customers in defence and public security, and in critical infrastructure segments. It will also continue to pursue growth in international defence, as well as public safety and security businesses.

ST Engineering shares closed at S$3.80 on Tuesday, up S$0.02 or 0.5 per cent.

READ MORE: ST Engineering to be reorganised into 2 main clusters