How Did The Aerospace 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 and Marine segments in here and here, respectively. In this article, I will have a quick review of the Aerospace segment’s 2016 business performance and future outlook.

Note: A review of the Land Systems business has been published. It can be found right here.

2016 business performance

ST Engineering’s 2015 annual report gave a good overview of the business activities of the Aerospace segment. The segment “provides a spectrum of maintenance and engineering services that include airframe, engine and component maintenance, repair and overhaul; engineering design and technical services; and aviation materials and management services, including Total Aviation Support.”

In 2016, the Aerospace segment was the largest revenue and profit contributor to ST Engineering’s overall results.

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

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

2016 was a decent year for the Aerospace business. There was strong top-line growth of 19% and although the bottom-line increase was tepid, there was still growth seen. Lim Serh Ghee, the president of ST Aerospace, shared the following comments on the segment’s performance in 2016:

 “The Aerospace sector achieved comparable profits despite headwinds. We will continue to strengthen our core competency as a total aviation support provider and invest in capabilities such as data analytics to enhance service offerings and create better value for customers worldwide.”

The Aerospace business can be further broken down into three sub-segments and you can see how each sub-segment had performed in 2016 in the table below: 

ST Engineering Aerospace sub-segment performance
Source: ST Engineering 2016 results announcement

We can see that the Engineering & Material Services sub-segment had a really good year. But its performance was offset by declines in the Component/Engine Repair & Overhaul sub-segment.

What lies ahead

ST Engineering expects the Aerospace segment’s revenue and profit before tax in 2017 to be “comparable” with what was achieved in 2016.

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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.