ST Engineering Q3 revenue up 14% at S$2.8 billion; interim dividend at S$0.04 per share
It has S$8.3 billion worth of new contracts as at the end of September
ST ENGINEERING’S revenue for the third quarter ended September rose 14 per cent to S$2.8 billion, from S$2.4 billion in the previous corresponding period.
The technology and engineering group also proposed a third-quarter interim dividend of S$0.04 per share, unchanged from the previous year.
For the nine months ended September, ST Engineering’s revenue amounted to S$8.3 billion, or 14 per cent higher than the S$7.3 billion in the same period a year earlier.
This was mainly driven by the group’s defence and public security, as well as commercial aerospace sectors, said the group in a business update on Monday (Nov 18).
The defence and public security sector reported an 18 per cent increase in contributions to S$3.6 billion in revenue for the first nine months of FY2024, from S$3.1 billion in the prior year.
The higher revenue was attributed to “strong growth in all sub-segments”, as well as new contracts in the first nine months of FY2024.
Contributions from commercial aerospace were up 16 per cent on the year at S$3.3 billion for the nine-month period, from S$2.8 billion. This comes amid robust engine maintenance, repair and overhaul growth, said the group.
The commercial aerospace segment recorded S$2.9 billion worth of new contracts in the nine-month period, it added.
Jeffrey Lam, group chief operating officer of ST Engineering, pointed out during a media briefing on Monday that a lot of aircraft lessors and airlines are keeping their passenger planes, and this has resulted in insufficient feedstock for passenger-to-freighter conversion.
He expects this to be a short-term phenomenon that will resolve in the coming year or two when planemakers Boeing and Airbus deliver more new planes.
This is not going to affect the mid-single-digit earnings before interest and tax (Ebit) margin projection for ST Engineering’s passenger-to-freighter sub-segment for 2024, though.
“Even with lower volume, obviously we need to look for ways to deliver more efficiently (and) more effectively, to be able to achieve the outcomes,” he said.
Vincent Chong, group chief executive, added that the Ebit margin is a function of the learning curve that does not change even though the macro factors may be a bit different now. Thus, the Ebit margin for 2025 and the revenue target of S$700 million by 2026 for the passenger-to-freighter sub-segment remain unchanged.
ST Engineering is trying to make up the shortfall in the contributions from this sub-segment with contributions from heavy maintenance for aircraft.
Revenue from the group’s urban solutions and satellite communications segment rose 0.3 per cent year on year to S$1.4 billion. This comes as urban solutions growth was offset by lower satellite communications revenue, said the group.
TransCore, the group’s subsidiary in the US that provides tolling technology and traffic management solutions, has been awarded an order worth US$1.7 billion, disclosed chief financial officer Cedric Foo.
The order is to develop and maintain the back office system, as well as operate customer service centres for various toll highways and bridge agencies in New Jersey.
But the Singapore group has not included in its latest order book this significant deal because the incumbent vendor has lodged a protest against the award – a move that Foo described as “not uncommon for US government contracts”.
As at end-September 2024, the group’s order book stood at S$26.9 billion, of which S$8.3 billion are new contracts for the nine-month period, with Q1 contributing S$3 billion, Q2 $3.1 billion and Q3 S$2.2 billion.
Chong noted the group’s order book was lower than the S$27.9 billion at the middle of 2024, because the value “fluctuates due to the varying timeline of contracts”.
Some S$2.6 billion from this year’s order book is expected to be delivered in Q4 2024.
ST Engineering shares slid 4.2 per cent or S$0.20 to S$4.51 at 2.30 pm on Monday.
