SATORP project skews Rotary Engineering's 1Q11 results

The 27% YoY fall in the company's revenue to S$130.5mln was due to the project's progress from the engineering and procurement to the construction phase.

Rotary said the drop was also caused by fewer projects in 1Q11. Gross profit margin of 17.7% was comparable to 1Q10's 17.9%.

In a statement. OCBC Research noted that days sales outstanding continued to increase from 134 days in FY09 and 183 days in FY10 to 210 days in 1Q11 (vs. 193 days in 4Q10).

According to Rotary, this was mainly due to time taken in respect of claim procedures and billing documentations in accordance with contractual terms of the SATORP project.

The company added that it has not experienced collection issues with regards to billings to SATORP. Trade and other payables, meanwhile, decreased in line with lower business activities.

OCBC said that Rotary should see an increase in cash flow if most of the invoices to the SATORP project are approved by the end of the year as receivables come down.

As of March 31, the engineering phase of the SATORP project has almost completed. The procurement and construction phases are 73% and 39% done, respectively.

Though fluctuation in revenue and profitability is expected to continue in the next quarter as a result of the phase change in the SATORP project, the company said it expects to maintain last year's profitability in FY11.

Rotary's order book stands at S$824m, of which more than 90% is attributable to projects outside Singapore.