Published February 20, 2009

Venture Q4 profit falls 94%

It blames earnings slump on CDO losses, impairment charge on associate

By ONG BOON KIAT

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LOSSES in collateralised debt obligation (CDO) investments continued to bite deeply into Venture Corporation's bottom line, dragging the company's fourth-quarter income to its lowest level in at least six years.

Mr Wong: 'If it is low tide, and the business comes down, we have to make sure our cost structure is appropriate.'

For the three months to Dec 31, 2008, net income tumbled 94 per cent to $4.6 million, from $74.3 million in the year-ago quarter, the electronics manufacturer said yesterday.

Full year net income fell 44.4 per cent to $166.7 million, from $300 million a year ago.

Revenue for Q4 slipped 5.9 per cent to $906.9 million, from $963.4 million a year ago. Full-year revenue came to $3.78 billion, down 2.3 per cent from $3.87 billion in 2007. Full-year earnings per share fell to 60.8 cents, from about $1.10 in 2007.

Venture blamed the decline in profits for both Q4 and full year on CDO losses and an impairment loss on an undisclosed associate. For Q4, the company booked a $57.6 million loss for its CDO investments. The impairment loss, incurred in the same period, was $6.3 million.

For the full year, CDO losses totalled $114.5 million.

CDO losses have been a bane for Venture in recent years. Since the US sub-prime mortgage crisis began to spread, Venture has had to make fair-value adjustments to these debt instruments, which in turn dented its earnings.

Despite the non-operational losses, Venture chairman and CEO Wong Ngit Liong said the group's operational performance in 2008 was 'satisfactory' and resulted in a 'healthy' cash reserve. The group's key market segments did not suffer any 'major deterioration' last year, he said.

But 2009 could be a year of 'compression', he said. 'If it is low tide, and the business comes down, we have to make sure our cost structure is appropriate.'

Mr Wong also talked of 'right-sizing' operations in the year ahead, but did not say if staff cuts could be on the cards for the company in the face of the slumping economy.

Since the global financial crisis broke out, Venture has taken a series of cost-cutting steps. Last September, it implemented a wage freeze exercise among senior management. Last week, it disclosed that the pay of senior and middle management has been slashed by between 10 and 20 per cent since February to reduce costs.

Those wage cuts could help Venture shave 5-6 per cent from its total expenses, Mr Wong said yesterday.

Venture is Singapore's largest publicly-traded electronics company. It counts technology giants like Hewlett-Packard, Agilent Technologies and NCR Corp as key customers.

The mainboard-listed firm has 1,700 staff in Singapore spread across its Ang Mo Kio and Marsiling facilities, part of its 14,000-strong worldwide headcount.

Venture ended 2008 with cash and cash equivalents of $513.8 million. It has recommended a final dividend of 50 cents per share on a one-tier tax-exempt basis. This is subject to the approval of shareholders at the company's annual general meeting to be held in April.

Venture's shares closed 12 cents higher at $4.12 yesterday.