How Did The Marine Business Segment Of Singapore Technologies Engineering Ltd Fare In 2016?

Singapore Technologies Engineering Ltd (SGX: S63) is an engineering conglomerate with four main business segments, namely, Aerospace, Electronics, Land Systems, and Marine.

The company recently announced its 2016 full year results. Given the complexity of ST Engineering’s business, I thought it would be useful for investors to take a separate look at the performance of each of the four segments.

I had previously covered the Electronics segment here. In this article, I will have a quick review of the Marine segment’s 2016 business performance and its future outlook.

Note: Reviews of the Aerospace and Land Systems segments’ performances have been published. They can be found right here and here.

2016 business performance

According to ST Engineering’s 2015 annual report, the Marine segment’s activities include providing turnkey building, repair and conversion services for many different types of naval and commercial vessels.

Its clients come from all over the world and it has an established track record of providing high engineering content ship repair and ship conversion services.

Here’s a table showing some of the important financial numbers for the segment for 2015 and 2016:

ST Engineering Marine segment income statement
Source: ST Engineering 2016 results announcement

It’s kind of obvious that the Marine segment did not do too well in 2016 – there were double-digit declines in both revenue and profit. Ng Sing Chan, the president of ST Marine, shared the following comments about the segment’s performance in 2016:

 “Marine sector recorded lower profits in 2016 due mainly to poorer performance from the US operations. We expect the operating environment to remain challenging in FY2017 and will stay focused to build up our order book.”

ST Engineering’s Marine segment has a few sub-segments and you can see how their revenues and profits before tax fared in 2016 in the table below:

ST Engineering Marine sub-segment income statement
Source: ST Engineering 2016 results announcement

The Shipbuilding sub-segment had brought in lower revenue and that was due to lower revenue recognition from contracts from both its local and US operations. As for another laggard, the Engineering sub-segment, there were lower activities from the fabrication of rig living quarters and environmental engineering.

Shiprepair earned higher revenue because of higher para military repair activities.

A future outlook

The earlier quote from Ng already mentioned that ST Engineering’s Marine segment expects a tough 2017. For more clarity, the segment’s revenue in 2017 is expected to be comparable to that in 2016, while the profit before tax is expected to be lower.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.