ST Engineering's profit drops 8 per cent on China impairments

Singaporean group hopes to benefit from increased US defence spending

SINGAPORE - Singapore state-owned defence and engineering company Singapore Technologies Engineering announced on Thursday its net profit for the full year in 2016 was 484.5 million Singapore dollars ($341.6 million), down 8.4 per cent from the previous year. The drop was due to the company having to book impairments and provisions relating to the closure of its construction vehicle business in China.

Total revenue for the year was S$6.68 billion, up 5.5 per cent on the year. For the fourth quarter, revenue grew 2.3 per cent on the year to S$1.82 billion, while net profit increased 21 per cent to S$170.4 million.

The main drag on the full-year net profit was a one-off charge of S$65.1 million comprised of impairment and closure costs for construction vehicle production operation Jiangsu Huatong Kinetics, a joint venture with a Chinese state-owned company. The group announced last October that JHK would likely cease production after demand for construction equipment in China fell dramatically as the economy slowed.

The group's land systems segment -- which includes the construction and armed vehicles businesses -- saw profit before tax decline 66 per cent mainly due to JHK's closure. Going forward, however, there is a possibility that the segment's US operations could benefit from the new Trump administration, which has indicated a possible increase in infrastructure and defence spending.

"Depending on how it pans out, the increase in spending on defence side, I think, will be a positive impact on us," said Vincent Chong, president and chief executive of ST Engineering, at a press conference on Thursday. The US business made up 25 per cent of group revenue in 2016, up from 24 per cent in 2015. The group has around 5,000 staff in the country, said Chong.

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