ST Engineering’s net profit plunges on back of hefty charges for outdated stock

It recorded its steepest earnings drop in 12 years.

Massive obsolescence charges are the culprit behind the 8.4% drop in ST Engineering’s net profit for 2014.

According to UOB Kay Hian, total obsolescence charges amounted to 19% of STE’s 2014 net profit. STE suffered its largest earnings drop in over a decade due to the surge in write-offs.

For instance, STE wrote down $52m European rotables and component segments as part of its restructuring programme at its aerospace division.

Its land systems division suffered the same fate, where STE wrote down $46m relating to its inventory of speciality vehicles and parts in China.

“While most of the obsolescence charges are unlikely to be repeated, STE was nonetheless cautious in its guidance and said it would have better visibility by mid-15. Watershed year as STE appears to be kitchen sinking with write-offs for key segments. Thus, there is the possibility of 2015 being a better year,” stated UOB Kay Hian.