Singapore Technologies Engineering Ltd Talks About Dividends And The Troubled Oil and Gas Sector

Conglomerate Singapore Technologies Engineering Ltd (SGX: S63) had an earnings briefing recently.

A number of topics were covered during the presentation, and also in the question and answer session that followed. I would like to highlight a few management comments which might be of interest. This would be on dividends and problems in the oil and gas sector.

Dividends, dividends, dividends

Vincent Chong, President and Chief Executive Officer of ST Engineering said this during the second quarter earnings briefing:

On the investment side, we will continue to invest to pursue long term sustainable growth.

We will also continue to return value to our shareholders via our dividend payout; Taking a long term view of our business performance, unencumbered by short term aberrations in the marketplace.

For context, ST Engineering kept its interim dividend unchanged in 2016. The conglomerate had paid out 15 cents per share annually between 2013 to 2015. Chong highlighted this point.

So, as you can see, we have maintained the interim dividend at five cents per share. And that’s notwithstanding the difficult external environment we see at this time, underscoring our confidence in returning value to our shareholders.

We will have to wait and see if ST Engineering keeps the final dividend at 10 cents a share too.

The Swiber contagion

On another note, Chong talked about cost reductions at ST Engineering’s Marine segment. He said that $10 million of expenses were removed including a 20% reduction in staff cost. When asked about the challenging operating environment in the oil and gas sector, Chong said:

From a staff cost standpoint, it is a continued streamlining of the business support that is required. Especially in our US operations. Obviously, a challenging environment requires us to continue streamline our operations. But in a sustainable way, because we are in the business for the long haul.

ST Engineering was also asked to comment about the possible contagion effect from the mess at Swiber Holdings Limited (SGX: BGK). Ng Sing Chan, President for ST Marine said:

Honestly, no company in the oil and gas sector is spared in the current downturn.

Ng talked about ST Marine’s customer selection process.

I like to believe that our process is pretty robust. We have what you call a ‘know your customer’ policy. So, we are pretty selective. However, can one be 100% sure?

Despite the robust process, Ng said that ST Marine has had to make some allowances for doubtful debts as some of its customers were affected by the tough operating environment. He also made it clear that ST Marine does not have any exposure to Swiber Holdings.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.