How ST Engineering's automotive segment crashed to 'almost zero profit'

Blame it on weak China sales.

ST Engineering's automotive division went off track as weak China sales plagued its profits in 1Q. According to CIMB, revenue from automotive (75% of Land System’s revenue) declined 13% yoy to S$247m, with almost zero profit for the division. This was mainly due to the challenging environment in China for its specialty vehicle sales.

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However, vehicle sales in the US are picking up (revenue up 16% yoy) on the back of improving economy. 

Electronics’ 1Q14 PBT was stable yoy at S$32m. Contract flows were stronger than what was announced in 1Q14 (S$581m); the division has secured some maintenance contracts that were not announced. With the recent S$100m contract from SMRT, YTD orders announced is now at S$658m. 

Land Systems PBT fell 13% yoy to S$19m, affected by softer projects delivery and commercial vehicle sales. Marine’s PBT rose 6% yoy to S$32m, with higher shipbuilding jobs in Singapore. Order enquiries are strong from the defence and commercialsectors. We estimate Marine to win c.S$1bn of orders in FY14 (FY13: S$1.9bn).