Sale of unit, forex gains lift Tat Hong's Q2 profit

Singapore

CRANE rental company Tat Hong Holdings reported a net profit of S$11.5 million for its second quarter ended Sept 30, 2014, up 39 per cent from S$8.2 million a year ago.

However, the numbers included gains from the sale of its subsidiary Hup Hin Transport in July. This partly boosted other income to S$10.1 million, from S$2.9 million last year. Foreign exchange gains of S$4.5 million were also recorded for the quarter, compared to losses of S$6.6 million a year ago. Take these two factors out, and the numbers do not look as pretty, analysts said.

Revenue fell 18 per cent to S$152.8 million, from S$185.3 million. This was mainly due to a 35 per cent drop in distribution revenue from S$75 million to S$49 million, as management scales down excavator sales in Indonesia and lower sales are recorded in Singapore.

Tat Hong CEO Roland Ng told analysts on Friday evening that Hup Hin had to be sold as part of the "fat" the management was trimming. Hup Hin was involved in mobile lorry cranes and trailers that took up storage space and required land. Tat Hong's crawler cranes, by contrast, could be deployed on site for a few months at a time.

Mr Ng believes the worst is over for the group's key Australian business. "But the recovery won't be that fast," he said. He added that his expectations for Australia's new government to help its economy had been disappointed.

In Singapore, the crane rental market is challenging, with rates having dropped 30 per cent compared to six months ago. Mr Ng said he prefers not to have a price war, and would rather redeploy assets into other neighbouring countries where competitors' networks are not as strong.

Chief financial officer Lional Tseng said that on the bright side, Tat Hong's tower crane rental business in China saw revenue increase 9 per cent to S$24.5 million. Utilisation rates went up to 80 per cent at end-September compared to 76 per cent a year ago, despite a larger fleet size of 933 tower cranes against 862 units a year ago.

Mr Tseng added that overall gross profit margin was holding steady at 36.8 per cent, due to a much higher margin from the crane rental business.

Tat Hong declared an interim dividend of half a cent, compared to one cent a year ago.

Tat Hong closed unchanged at 79.5 Singapore cents.