STE

STE: 3Q14 results missed estimates, with net profit down 7.7% to $121.3m taking 9M14 net profit to $391.7m (-5.2%). Revenue was flat at $1.6b, with higher revenue from the Marine sector (+13.7%) largely offset by lower revenue recorded by the Aerospace sector (-7.4%), while revenue for the Electronics (+1.1%) and Land Systems (+2.6%) sectors were comparable y/y. The stronger revenue in the Marine sector was led by higher shipbuilding revenue from the local operation as well as higher Engineering revenue, while Aerospace’s weakness was due to lower contributions from the Component/Engine Repair & Overhaul business group. Overall gross margin inched down to 21.5% versus 22.4% from the previous year, while bottom-line was further weighed by a 17.5% rise in other operating expenses to $35.5m, dragged by impairment losses on intangible assets in the Land Systems sector. Order book as at Sep ’14 stands at $13.2b.