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The Good And Bad That Investors Should Know About Singapore Technologies Engineering Ltd’s 2017 Second Quarter Earnings

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

In mid-August, the company released its 2017 second quarter earnings. There are both positive and negative takeaways that investors may want to learn about. But first, let’s run through the company’s numbers.

The results

Here’s a condensed income statement for ST Engineering from its reporting quarter:


Source: ST Engineering 2017 second quarter earnings announcement

Although the company managed to post an 8% increase in revenue in the reporting quarter, profit attributable to shareholders fell by 12%.

The positives

Firstly, ST Engineering’s overall revenue growth was driven by broad-based improvements. With the exception of the Marine segment, all segments posted revenue growth.

Secondly, the company’s order book had grown. ST Engineering ended the second quarter of 2017 with an order book of S$13.5 billion, of which S$2.1 billion is expected to be delivered in the second half of 2017. The engineering conglomerate had an order book of S$11.6 billion and S$13.3 billion, respectively, in the second quarter of 2016 and first quarter of 2017.

Thirdly, ST Engineering has a strong balance sheet. As of 30 June 2017, the company had S$1.26 billion in cash and equivalents, and borrowings of S$1.03 billion. This puts the company in a net cash position of around S$230 million.

The negatives

Firstly, ST Engineering’s operating margin fell from 10% in the second quarter of 2016 to 9%. A weaker margin in the Electronics segment and negative margin for the Marine segment had been the main culprits.

Secondly, the Marine segment faced huge challenges. For the reporting quarter, quarterly profit before tax declined from a positive S$20.4 million a year ago to a negative S$8.1 million.

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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.