How Did Singapore Technologies Engineering Ltd’s Various Businesses Fare In The First Quarter Of 2017?

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

The company recently reported its 2017 first quarter results. Given the complexity of ST Engineering’s business, I thought it would be useful for investors if I were to take a look at the performance of each segment.

Key segment revenues

Here’s a table showing the revenue numbers for the four segments in the first quarters of 2017 and 2016:

Source: ST Engineering 2017 first quarter earnings presentation

You can see that the revenues for ST Engineering’s four main segments were all down in the first quarter 2017, with the exception of the Electronics segment.

The Aerospace segment’s revenue fell because of lower revenue from two of its business groups, namely,  Aircraft Maintenance & Modification, and Component/Engine Repair and Overhaul. They had offset growth from the Engineering & Materials Services business group.

For the Land Systems segment, its overall revenue was lower mainly due to a weaker performance from its Automotive and Munitions & Weapon business groups.

Next, we have the Marine segment and it suffered from revenue declines across all its business groups.

We’re down to the only segment with top-line growth, namely, Electronics. All three of its business groups recorded higher revenue.

Profits of key segments

The table below illustrates the profits before tax for ST Engineering’s four main business segments in the first quarter of 2017 and 2016.

Source: ST Engineering 2017 first quarter earnings presentation

Interestingly, despite the aforementioned fact that revenues for most of ST Engineering’s business segments had suffered year-on-year declines, the picture with the segments’ profits before tax looks very different. Except for Land Systems, all other segments reported a higher profit before tax in the first quarter of 2017.

ST Engineering attributed the pre-tax profit growth of the Aerospace segment to a better sales mix, which resulted in a higher gross margin.

Although the Electronics segment enjoyed growth in pre-tax profit, the rate of growth is lower than its revenue. This is because of a “less favourable sales mix and lower other income.”

The Marine segment managed to post higher profit before tax due to a better performance from its Shipbuilding business group in the US.

Lastly, Land System’s profit before tax had declined in the first quarter of 2017 because of the fall in revenue.

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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.