Venture Corp hit by depreciating US$

The company’s 4Q11 core profits suffered with a significant 34% decline.

According to CIMB analyst Jonathan Ng, 4Q11 sales and core profits were down 10% and 34% yoy respectively, marking the third consecutive quarter of contraction. Sales of all product segments, with the exception of Test and Measurement (T&M) and retail Store and Solutions and Industrial (RSSI), contracted yoy.

“On a positive note, cash flows were strong with S$75m of positive free cash flow generated in 4Q, enabling Venture to end the year with more than S$300m in net cash. As expected, it declared an unchanged final dividend of 55cts a share, translating into a yield of 7%,” he added.

The depreciation of US$ could be the culprit for the company’s dip in overall revenue. According to Yeak Chee Keong from Kim Eng, the dip in overall revenue was attributed to translation effects of the US$ decline against the S$. Neglecting this effect, revenue would have fallen by a lower 1.0%.

“Other than the Test & Measurement and the Retail Store Solutions segments, each of the other three segments registered a YoY drop in revenue. Net margin came in lower at 6.4% compared to 7.0% a year ago, but this was still within the company’s targeted margin band of 6-8%. We also note that net margins have trended lower sequentially over the past four quarters,” he added.

But despite the figures, OCBC believes that the outlook is not as negative, with VMS expecting to see a better picking from 2H12 onwards; this as it anticipates improved traction with several key customers this year. VMS further adds that it expects to capture full-year revenue from products launched towards the end of 2011; in fact, a number of new products in all business segments are at the threshold of market release.

“Nevertheless, 1Q12 is traditionally a slow quarter; and management further notes that it is cognizant of the uncertainty in the global economy and the relative weakness in some customers’ business,” said OCBC.