Moderate growth, lower contributions from JVs cited
By VEN SREENIVASAN
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THE impact of a creeping slowdown in the aviation industry saw SIA Engineering Co's (SIAEC) topline revenue growth moderating during the second quarter, while contributions from its 22 associates and joint ventures slipped slightly.
The result was a 1.5 per cent year-on-year dip in earnings for the July-September quarter to $73.4 million. This came on the back of a modest 5.1 per cent rise in topline revenue to $279.3 million for the quarter.
Share of profits from joint venture and associate companies slipped 6.1 per cent to $39.7 million. The fall on a quarter-to-quarter sequential basis was 8.9 per cent.
First half net profit slid 8.9 per cent to $132.1 million, from $145 million a year earlier. Revenue slipped 1.2 per cent to $529.5 million.
A steady downtrend in air traffic saw SIAEC's airframe and component overhaul revenue - which accounts for half the company's business - slipping 5.7 per cent during the first half to $317.1 million.
As a result, the contribution to overall profit fell by 37.3 per cent during the first half to $23.5 million, from $37.5 million a year earlier.
On the other hand, an 8.1 per cent increase in line maintenance and technical ground handling revenue to $179.8 million helped cushion the fall in airframe and components side. In fact, this division's first half profit contribution rose a whopping 58.5 per cent to $32.5 million.
A third unit, fleet management revenue - for 57 planes belonging to seven clients - was flat at $32.5 million.
But first half profitability for this business plunged 90.6 per cent to just $500,000.
SIAEC's business is still predominantly from its parent Singapore Airlines group, which accounted for two-thirds of its revenue.
Its subsidiaries got 57 per cent of their revenue from working on SIA's planes, while joint ventures and associates obtained 69 per cent of their revenue from non-SIA clients.
The company ended its first half with $280.5 million in cash or a net asset per share of $1.032.
It also declared an interim dividend of five cents a share.
The payout of $53.9 million translated into a payout ratio of 41 per cent.
Despite the obvious challenges, chief executive William Tan remains upbeat.
'We should be less impacted than other MRO players because we service the new generation fleets which are less likely to be parked during a slowdown,' he told BT recently.
'Also, the fact that we provide integrated services and have extensive after sales collaborations with OEM (planemakers) means our service will remain in demand as long as these new super efficient planes fly. We have first mover advantage through our investments in infrastructure, systems and human resources. So I would say we are relatively less exposed.'
The company has been boosting efficiency and driving costs by building facilities closer to clients or in lower cost markets. This week, it will commission work on the first of its three new hangars at Clark, Philippines.
'The market is there, and we have quite good visibility of what's going on ahead. We are well diversified in aircraft types and well hedged against any particular change that impacts the industry.'
The stock closed three cents or 1.6 per cent higher yesterday at $1.95.
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