ST Engineering(SGGKY) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Group revenue for FY 2021 was $7.7 billion, a 7.5% increase year-on-year [3] - EBIT increased to $674 million, reflecting a 13% year-on-year growth [4] - Profit before tax (PBT) rose to $638 million, a 19% increase year-on-year [4] - Net profit reached $571 million, up 9% year-on-year, impacted by reduced government support [4][9] - The order book at the end of 2021 was $19.3 billion, significantly higher than $15.4 billion at the end of 2020 [12] Business Segment Data and Key Metrics Changes - Commercial Aerospace revenue grew 6% year-on-year, with EBIT increasing by 125% due to higher revenue and cost savings [32] - Urban Solutions and Satcom (USS) revenue increased by 8%, but EBIT dropped 18% due to M&A expenses and chip shortages [33] - Defense and Public Security (DPS) revenue also grew by 8%, but EBIT decreased by 4% due to lower government support [34] Market Data and Key Metrics Changes - Revenue breakdown by region showed Asia at 58%, the U.S. at 20%, Europe at 16%, and others at 6% [7] - The group experienced strong contract wins, securing $11.7 billion in new contracts for 2021, surpassing pre-pandemic levels [39] Company Strategy and Development Direction - The company aims to achieve sustainable growth by focusing on recovery in Commercial Aerospace, growth in Smart City initiatives, and expanding its International Defense business [40][41] - The proposed acquisition of TransCore is expected to enhance growth in the Smart City domain [33][42] - The company has set specific financial targets for 2026, including revenue growth in various segments [40][41] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in future performance, citing a robust order book and ongoing business recovery [21][22] - The company plans to offset the reduction in government support through cost-saving initiatives and business recovery [62] - Management acknowledged challenges such as semiconductor shortages and labor availability but emphasized resilience and strategic investments [50][51][56] Other Important Information - The Board proposed a final dividend of $0.10 per share, with a total dividend for FY 2021 of $0.15 per share [18][19] - A new dividend policy was approved to declare dividends quarterly instead of semiannually [20][46] Q&A Session Summary Question: Impact of semiconductor chip shortages - Management indicated that while some business segments are affected, the overall impact at the group level is not material, and steps are being taken to diversify supply sources [50][51] Question: CapEx investments for the year - The company confirmed it will continue to invest in CapEx to support long-term growth despite short-term challenges [51] Question: Effects of interest rate hikes and inflation - The company has an interest rate hedging policy in place and is prepared for potential impacts from rising rates [54] Question: Hiring plans for the year - The company plans to hire in growth areas, particularly in commercial aerospace and digital sectors [53][56][58]