ST Engineering posts 2Q19 net profit increased 18 percent, but missed CGS-CIMB forecast

ST Engineering display at CommunicAsia conference in Singapore in 2019.ST Engineering display at CommunicAsia conference in Singapore in 2019.

ST Engineering reported Wednesday its second quarter net profit increased 18 percent on-year to S$138.2 million on higher profit from the marine and “others” segments.

Revenue for the quarter ended 30 June rose 8 percent on-year to S$1.78 billion, the defense and aerospace company said in a filing to SGX.

CGS-CIMB had expected ST Engineering to report net profit of S$147 million.

Aerospace

The aerospace segment reported revenue of S$836 million, up 17 percent on-year, mainly on the acquisition of MRAS, partly offset by lower revenue form the aircraft maintenance and modification and component/engine repair and overhaul (CERO) businesses.

The lower CERO revenue was mainly due to the absence of an opportunistic engine sale and revenue from Jet Airways, which is undergoing liquidation, the filing said.

Net profit from the aerospace segment fell 4 percent on-year to S$64.2 million on a year-ago gain on portfolio rationalization, the sale of engines and the absence of contributions from Jet Airways, partly offset by contributions from MRAS, the filing said.

Electronics

Electronics revenue fell 3 percent on-year to S$495 million in the quarter, mainly on lower revenue from the communication and sensor systems group, partly offset by higher revenue from the large-scale systems and software systems groups, the filing said.

Net profit from the electronics segment fell 5 percent on-year to S$44.3 million, ST Engineering said.

“The decrease was largely due to lower revenue from timing in revenue recognition of projects and higher selling and distribution expenses as a result of increased sales activities to support international expansion, partly offset by favorable sales mix,” the filing said.

Land systems

The land systems segment reported revenue rose 10 percent on-year to S$296 million, on contributions from all three of its business groups.

Net profit from the land systems segment was nearly flat on-year at S$20.3 million on a less favorable sales mix and higher operating expenses in the robotics business, the filing said.

Marine

The marine segment posted second quarter revenue fell 6 percent on-year to S$139 million, mainly on the shipbuilding division, partly offset by better performance from the ship repair and engineering businesses.

Net profit for the marine segment increased 55 percent on-year to S$14.3 million, mainly on improvement in the U.S. shipbuilding performance and higher revenue from the engineering business, the filing said.

Others

The others segment reported revenue increased 75 percent on-year to S$14 million on higher sales from Miltope.

The net loss from the others segment was S$4.9 million, narrowing from S$25.4 million in the year-ago quarter, mainly on year-earlier costs from the early redemption of a medium-term note and the related interest expense, the filing said.

ST Engineering declared an interim dividend of 5.0 Singapore cents a share, unchanged on-year.

For the first half, ST Engineering reported net profit rose 14 percent on-year to S$269.3 million on revenue of S$3.51 billion, up 6 percent on-year.

Outlook

ST Engineering said its order book was at S$15.6 billion at end-June, a record high, with around S$3.8 billion set to be delivered in 2019.

“MRAS acquisition was completed in April. It has been accretive to the group’s earnings and its integration into the group is progressing well,” ST Engineering said. “The group’s underlying business remains strong and the group’s record high order book of $15.6 billion
gives the group revenue visibility over the next few years.”

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