UPDATE 1-Singapore's Venture profit falls on investment losses

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By Jennifer Tan

SINGAPORE, Feb 15 (Reuters) - Contract electronics firm Venture (VENM.SI) posted a 5 percent slide in quarterly earnings on Friday, hit by losses from its investment portfolio, and warned that business may be tough in the year ahead. But Venture, Singapore's second-largest contract electronics maker after Nasdaq-listed Flextronics International Ltd (FLEX.O), said that in spite of the fickle economic and financial environment, the motivation to outsource manufacturing remained strong for many U.S. and European companies.

"The environment will probably remain challenging for at least the first half of this year," Venture Chief Executive Wong Ngit Liong told a media and analyst briefing.

"We can help these companies achieve cost reductions."

The company's stock has been hammered by investor fears that a U.S. recession will crimp consumer demand, but most analysts are optimistic that the its focus on higher margin products such as health-monitoring gadgets would provide a buffer from the worst of the economic slowdown.

Venture said that its marked-to-market losses from collateralised debt obligations, or CDOs, amounted to S$16.2 million in 2007.

The company earned S$74.3 million ($52.6 million) for the three months ended December, compared with S$78.3 million in the same period a year ago.

The results were slightly above a mean net profit estimate of S$73.4 million from three analysts polled by Reuters.

For 2007, Venture reported net profit of S$300 million, up 25 percent from 2006 and in line with a mean net profit estimate of S$299 million from 14 analysts polled by Reuters Estimates.

Venture makes printers for Hewlett-Packard Co Ltd (HPQ.N), the world's largest computer and printer maker, which accounts for about a quarter of the Singapore's company's sales.

It also produces hard drives for computer storage firm Iomega Corp IOM.N and networking devices for electronics and testing equipment maker Agilent Technologies Inc (A.N).

Other products include radio-frequency communication products, handheld devices, health-monitoring equipment and vehicle safety sensors.

Last month, Flextronics posted a quarterly profit that beat expectations and stuck to its earnings forecasts, buoyed by robust demand for products such as LCD TVs, digital cameras and MP3 players.

Venture shares fell 22 percent in the October-December quarter, compared with a 7.9 percent gain in rival Flextronics stock and a 18 percent fall in Taiwan's Hon Hai Precision Industry Co Ltd (2317.TW). (Reporting by Jennifer Tan; Editing by Jan Dahinten)