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ST Engineering Takes Prudent Approach to Write Down Investments in Chinese Subsidiary

Singapore, 18 October 2016 - Singapore Technologies Engineering Ltd (ST Engineering) announced today that Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd (collectively JHK), the joint venture between its Land Systems arm, Singapore Technologies Kinetics Ltd (ST Kinetics) and China’s state-owned enterprise Jiangsu Huatong Machinery (JHM), has started the process for the cessation of production from today in order to reduce its operating losses.  JHK, of which ST Kinetics owns 75.3% and JHM owns the balance 24.7%, is in the road construction equipment business in China.

This comes after months of engagement between the two shareholders to evaluate various courses of actions for JHK moving forward.  Pending a decision on its future, JHK management has formally tabled a proposal for the cessation of production to the JHK Board, with a view that the business will not be able to operate on an ongoing basis as cash will soon run out.  The JHK Board, represented by both shareholders, will have 15 days from today to decide.

In light of the likely scenario that production will cease at the end of the 15-day period, ST Kinetics will record a one-off charge of about $61m for the third quarter ended 30 September 2016 (3Q2016).  This charge consists of an impairment of ST Kinetics’ net carrying value in JHK and closure costs including staff compensation. 

ST Engineering will therefore record the $61m one-off charge under the Land Systems sector in 3Q2016.

Had this one-off charge of $61m occurred in the financial year ended 31 December 2015, it would have had the effect of reducing ST Engineering's 2015 earnings per share of 17.05 cents by 1.97 cents, representing a 11.6% reduction, but no material impact on ST Engineering's last audited consolidated net tangible assets per share as at 31 December 2015.

ST Engineering is maintaining its guidance* for FY2016, as provided in its results announcement for the second quarter ending 30 June 2016.  The guidance was for higher revenue and lower profit before tax for FY2016 compared to FY2015, barring unforeseen circumstances.  ST Engineering will release more information in its 3Q2016 results, which will be announced on 10 November 2016. 

*Notes to editor:

ST Engineering’s financial guidance is indicated as follows:
Higher: more than positive 5%
Comparable: +/- 5%
Lower: more than negative 5%

ST Kinetics (Singapore Technologies Kinetics Ltd) is the land systems and specialty vehicles arm of Singapore Technologies Engineering Ltd.  It is one of Asia’s leading land systems and specialty vehicles companies, delivering smart engineering solutions since 1967 for the commercial, defence and homeland security markets.  With more than 6,500 employees worldwide and revenue of over S$1.4b in FY2015, ST Kinetics delivers products and solutions to end users in more than 40 countries around the world; helping to maintain the peace of nations and increasing the productivity of businesses involved in earthmoving, road construction and goods distribution.  Please visit www.stengg.com for more information.

ST Engineering (Singapore Technologies Engineering Ltd) is an integrated engineering group providing solutions and services in the aerospace, electronics, land systems and marine sectors. Headquartered in Singapore, the Group reported revenue of $6.34b in FY2015 and ranks among the largest companies listed on the Singapore Exchange. It is a component stock of the FTSE Straits Times Index, MSCI Singapore and the SGX Sustainability Leaders Index. ST Engineering has about 23,000 employees worldwide, and over 100 subsidiaries and associated companies in 46 cities across 24 countries.  Please visit www.stengg.com for more information.

Media contacts:                       

Lina Poa
SVP, Corporate Communications, ST Engineering
Tel:       (65) 6722 1883
Email:   linapoa@stengg.com

Letticia Fong
AVP, Corporate Communications, ST Engineering
Tel: (65) 6722 1881
Email: letticiafong@stengg.com

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