Singapore Technologies Engineering Ltd’s Latest Earnings: An Overview Of The Aerospace Business

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. Given that ST Engineering has four business segments, I thought it may be useful to take a separate look at how each of the four segments had performed in the reporting quarter.

In this article, I will run through the Aerospace segment.

What the Aerospace segment does

The segment provides a range of maintenance and engineering services for the aerospace industry. These include: maintenance, repair, and overhaul services (MRO) for airframes, engines, and components; engineering design and development; technical services; pilot training, and more.

The results

The charts below show the revenue and profit before tax (PBT) performance for the Aerospace segment in the second quarter of 2017:

Source: ST Engineering 2017 second quarter earnings presentation

We can draw two observations.

Firstly, all three sub-segments – AMM (aircraft maintenance and modification), CERO (component/engine repair and overhaul), and EMS (engineering and material services) – within the Aerospace segment either maintained or grew their revenues compared to a year ago.

Secondly, the PBT margin for the AMM and CERO sub-segments had declined on a year-on-year basis. Nevertheless, the strong performance in the EMS sub-segment lifted the entire segment’s PBT by 6%.

Revenue by location of customers

The following chart is a quick summary of the geographical source of the revenue for ST Engineering’s Aerospace business in the second quarters of 2017 and 2016:

Source: ST Engineering 2017 second quarter earnings presentation

It’s useful to note that revenue growth for the Aerospace segment came from all of the company’s geographical categories, save for the US. Europe had the highest growth rate, with revenue up by 25% on a year-on-year basis.

In all, revenue for the Aerospace business is geographically diversified across three important continents around the globe.

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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.