Lower demand in the aerospace and electronics sectors is expected.
ST Engineering is anticipating a 5-15% YoY drop in revenue for FY2020, the group announced in a market update for Q1.
The reduction in customer demand, disruption in the supply chain, and workforce disruption due to the COVID-19 pandemic will drive lower revenue, according to ST Engineering.
The group expects to recognise $4.5b from its order book for the months of April-December 2020. ST Engineering’s order book currently stands at $16.3b as of 31 March, with the aerospace and electronics sectors securing a combined $1.6b of new contracts for Q1.
ST Engineering expects the aerospace and electronics sectors to experience more impact than the land system and marine sectors. The company revealed that it is already experiencing deferments in some projects across business lines for its electronics business, a result of travel and movement restrictions imposed in the countries ST Engineering is active in.
Already, some tenders have been put on-hold as certain satcom customers (aviation, maritime, oil and gas segments) are reducing demand, whilst costs have increased due to disruptions in the supply chain.
Further, its business segments under the aerospace sector are already showing varying degrees of impact due to pandemic disruptions. Airframe and engine & component foresees lower demand for aircraft maintenance services, except for calendar-based maintenance; the group said that it is already in active discussions with customers on rescheduling.
Meanwhile, the original equipment manufacturing business has adjusted its production in accordance with customers’ production schedules, and is currently seeing reduced sales.
In contrast, ST Engineering projects less disruptions for its land systems and marine sectors, due to their high portion of defence-related projects. These are expected to provide revenue stability for the group.
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