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These 2 Companies Reported Lower Profits In Their Latest Quarterly Earnings Updates

The earnings season had recently come to an end. As is common with every earnings season, there will be some companies posting growth, some posting mixed numbers, and some experiencing declines. Let’s take a look at two companies that delivered lower profits recently:

1. In mid-February, Thai Beverage Public Company Limited (SGX: Y92) reported its first quarter earnings for the financial year ending 30 September 2018 (FY18). As a quick introduction, Thai Beverage is a company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages.

During the quarter, its revenue was down by 2.6% year-on-year to THB 46.8 billion, while its net profit fell by 61% to THB 3.0 billion. If non-recurring expenses were adjusted for, Thai Beverage’s net profit for the quarter would have dropped by 29.3% year-on-year instead.

As of 31 December 2017, Thai Beverage had cash and cash equivalents of THB 16.5 billion and total borrowings of THB 229.5 billion. This gives a net debt position of THB 213.0 billion, up significantly from the net debt position of THB 30.7 billion seen in the previous sequential quarter.

The company’s weak performance was driven by a Thai economy that has yet to fully recover despite the end of the official mourning period for King Bhumibol Adulyadej’s passing on October 2016.  Notably, the two main business segments of Thai Beverage – namely Spirits and Beer – saw declines in their revenues and profits.

On a slight positive note, the Non-alcoholic Beverages and Food segments both experienced growth in the reporting quarter. The former was due to higher sales volume, while the latter was driven by acquisitions (includes chains of hotpot, Thai, and KFC restaurants).

2. In late February, Singapore Technologies Engineering Ltd (SGX: S63) released its 2017 fourth quarter and full year earnings update. As a quick introduction, ST Engineering is a large engineering conglomerate with four main business segments, namely, Aerospace, Electronics, Land Systems, and Marine.

During the reporting quarter, the engineering conglomerate experienced a 6.4% fall in revenue to S$1.70 billion. Its profit attributable to shareholders also slipped by 1.1% to S$168.5 million. The good thing is that ST Engineering ended 2017 with a strong balance sheet (there was a net cash position of S$0.24 billion), and its dividend for the whole of the year was kept unchanged at 15.0 cents per share.

In ST Engineering’s latest earnings update, its president and CEO, Vincent Chong  shared some comments on the company’s future plans:

“We will continue to strengthen our core businesses, drawing upon the strengths of each sector to offer innovative technologies in the areas of defence and smart city solutions (including, among others, cybersecurity, public security services, urban transportation and robotics) to our customers around the world.

We expect that our performance will strengthen over the next few years. Growth will come from the Aerospace sector as its A330 and A320 passenger-to-freighter conversion programmes gain momentum, and from the more expansive smart city offerings emanating from the Electronics and Land Systems sectors in Singapore and overseas. Industry conditions for the Marine sector are likely to remain weak in 2018, but we will continue to focus on strengthening our operational efficiency.”

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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.