Sats cuts loss in Q2; gears up to handle vaccines

Singapore

GROUND-HANDLER and food supplier Sats continued to chalk up a quarterly loss but managed to reduce the red ink to S$33.2 million for the three months to September from S$43.7 million in the preceding quarter.

The firm also announced in a regulatory filing on Thursday that it is gearing up to handle vaccines for the novel coronavirus. Several of its facilities, including those in Singapore and Beijing, are International Air Transport Association (IATA) CEIV Pharma certified.

IATA created the Center of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV Pharma) to ensure international and national compliance for safeguarding product integrity while addressing specific air cargo needs.

In a briefing webcast, Sats chief executive officer Alex Hungate, said the company is also in the process of gaining the certification for facilities in Jakarta and in Kuala Lumpur.

"And we believe that Singapore will be able to target realistically a disproportionate share of that transit cargo business because of the reputation that we built up for the precision of our pharmaceutical handling."

Sats has seen a 15 per cent increase in pharmaceutical cargo throughput by weight in Singapore in January to July, compared to the same period last year.

While global air cargo demand continued to be resilient, passenger traffic has been crushed by the pandemic with border closures worldwide.

Sats continued to see its inflight catering and ground handling business impacted in the second quarter. It chalked up earnings of S$60.7 million for the corresponding period a year earlier.

Revenue dropped 53.5 per cent to S$231.1 million. Efforts to slash costs by 46.6 per cent year on year or S$201.3 million allowed the firm to mitigate the decline in takings, helping it to achieve operating breakeven.

A 61.3 per cent fall in staff cost - as a result of government reliefs, lower contract services and a drop in headcount by 500 - helped contribute to the decrease in expenditure.

Sats' share of results from associates and joint ventures experienced a year-on-year decline from a profit of S$13.7 million to a loss of S$12.8 million, as the pandemic also hit their performance.

It took an impairment charge of S$31.6 million on investment in an associate and long-term investment during the quarter. Year to date since the onset of the pandemic in Asia, the group has taken aggregate credit losses and impairment charges of about S$90 million, including that for Q2.

Loss per share stood at three Singapore cents, compared to earnings per share of 5.4 Singapore cents for the year-ago period. In light of the significant uncertainties in the operating environment, Sats will not pay an interim dividend. The interim dividend a year ago was six Singapore cents.

Net asset value per share dropped from S$1.45 as at end-March to S$1.38 as at end-September.

The outlook remains challenging with flight and passenger volumes still heavily constrained by pandemic-related travel curbs, although demand for air cargo continues to be more resilient, said Mr Hungate.

While flight, passenger and cargo volumes have all risen from their lows in April, the trajectory of the recovery remains uncertain with Covid-19 resurgent in some countries, he added.

Shares in Sats ended at S$3.60 or seven cents higher on Thursday, before the financial results were released.