Venture 4Q18 net profit drops 25 percent, but beats some analysts’ forecasts

Singapore 50 dollar bill

Contract manufacturer and supply chain manager Venture Corp. reported on Friday its fourth quarter net profit fell 24.7 percent on-year to S$107.7 million, but beat some analysts forecasts.

CGS-CIMB had forecast fourth quarter net profit of S$100.7 million, while UOB KayHian estimated fourth quarter net profit would come in at S$101 million.

Revenue for the quarter ended 31 December was S$905.93 million, down 16.6 percent on-year, mainly on the impact of customers transitioning their products and customer M&A activity, it said in a filing to SGX after the market close on Friday.

On a quarter-on-quarter basis, fourth-quarter revenue increased 17.6 percent on stronger customer demand, it said.

“Despite revenue headwinds, the group managed to sustain its profitability driven by high value creation through Engineering Design, R&D capabilities and Operational Excellence across several technology domains,” Venture said.

The net margin for the full year was 11.9 percent, down from 13.2 percent in the year-ago quarter, Venture said.

For the full year, Venture reported its net profit fell 0.7 percent on-year to S$370.06 million on revenue of S$3.48 billion, down 13.0 percent on-year. Excluding  a year-ago one-off gain from the disposal of an investment in an associate, full-year net profit would have risen 2.4 percent on-year, it said.

Venture proposed a final dividend of 50 Singapore cents a share, bringing the year’s total dividend to 70 Singapore cent a share, up 16.7 percent on-year.

In its outlook, Venture said it expected revenue growth from its portfolio of technology domains to continue, particularly with new product launches for its partners.

It also pointed to potential benefits from U.S.-China trade tensions.

“There have been increased interest from businesses looking to relocate production to Southeast Asia due to the U.S.-China trade war. This is expected to present new business opportunities for the group,” it said. “Venture remains alert to respond to any development in the global economy that may introduce new uncertainties to the operating environment.”

In a note before the earnings were released, CGS-CIMB pointed to Philip Morris USA parent Altria’s moves to establish brick-and-mortar stores in the U.S. in anticipation that its IQOS heated tobacco produce would soon be approved for sale there.

Analysts, including at Credit Suisse, KGI, CGS-CIMB and UOB KayHian, widely believe Venture is a manufacturer for Philip Morris’s IQOS smokeless tobacco device. Philip Morris describes IQOS as a hybrid between “analog” and e-cigarettes.



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