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Quarterly Profit Down at SIA Engineering

Siaec_logoSIA Engineering Company (SGX: S59), a subsidiary of Singapore Airlines (SGX: C6L), saw its revenue for third quarter of 2014 (3Q 2014) increase 2% year-on-year to S$283.8 million.

Share of profits from associated and joint venture companies, which contributed of 58.7% to the engineering outfit’s pre-tax profits, rose 2.5% to S$41 million. Currently, it has 25 joint ventures, spread over nine countries all over the world.

Net profit, however, dipped 9.7% to S$60.5 million, mainly due to increased staff costs, subcontract and material costs.

As of 31st December 2013, the company had a total debt of S$17.8 million, against a backdrop of S$462.1 million in cash and cash equivalents.

Looking at the cash flow statements, SIA Engineering generated S$43.2 million in cash flow from operations for the quarter, a drop of 2.9% over the previous year. With a capital expenditure of S$23.4 million, free cash flow was at $19.8 million. With such low capital expenditure requirements, the company can afford to churn out lots of free cash flow every year, enabling it to pay consistent dividends yearly. For the past five years, the dividend paid out per year has not come down below 16 cents per share.

The company feels that the near-term global economic outlook remains uncertain and the rising business costs present challenges to its operations. To mitigate the challenges, it will pursue improvements in productivity and will enhance its operating efficiencies. Overall, it expects its performance to remain stable.

The shares last changed hands at $4.91. This translates to a historical PE ratio of 20 and a dividend yield of 4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.