Earnings At Amtek Engineering Dropped 61% In Third Quarter

Amtek Engineering (SGX: M1P) is an Original Equipment Manufacturer (OEM) for precision engineering components. It specialised in metal, plastic and rubber products, serving clients in industries such as the automotive, consumer electronics and even the life sciences industry. The company announced it third quarter result on 9th May 2014.

Operating Result

Revenue for the company dropped 1% for the quarter year on year to USD146.9million. However, for the 9 months of its financial year, the revenue actually improved 3% to USD 481.1million. The company is facing weakening demand from the mass storage and consumer electronics customers and the revenue from these sector dropped 6% and 12% respectively year to date. All other sectors are seeing some growth. Cash conversion cycle for its business remains at 24 days.

Gross profit margin also declined to 12.8% for the quarter, which is almost 0.7% lesser than last year. Amtek Engineering faced more margin compression as its net profit for the quarter decreased more than 60% to USD1.6million for the quarter. For the 9 month of its financial year, the net profit also decreased 4% year on year to USD15.9million.

On the positive side, the company has been able to reduce its net debt slightly, from USD42.2million to USD33.9million. Its net debt to equity ratio improved to 19.5% from 24.3% at last financial year.

Amtek Engineering ended the quarter with a net asset value per share of USD 0.32. Year to date, it achieved an EPS of 2.9 US cents, which is similar to its last year result.

Going Forward

The management is seeing some slowdown in the IT sector, with some customers delaying their product launches. However, Amtek has been getting new businesses form the automotive sector which will help the group’s future earnings. More importantly, in March 2014, the company agreed to a merger with Interplex Industries which is a company in China. The acquisition will be done through a S$ 200million bond issued by Amtek in the same month.

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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 Stanley Lim doesn’t own shares in any companies mentioned.