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SATS Q1 net profit falls 14.4% on 'macro headwinds'

A WEAKER global economy put a dent in airport and food services provider SATS' first-quarter net profit, which fell 14.4 per cent from the same period a year earlier to S$54.7 million.

Revenue was S$465.1 million, up 5.8 per cent from the same period a year earlier, though growth in the gateway services and food solutions segments was partially offset by lower cargo revenue.

Cargo volume handled in the first quarter was 1.6 per cent lower than in the same period a year earlier, due to "global trade uncertainties", SATS said.

Food solutions revenue rose 0.8 per cent to S$241.4 million as core aviation catering subsidiaries in Japan and Singapore improved performance.

Gateway services revenue rose 11.9 per cent to S$223.3 million, of which S$22.5 million was attributable to the consolidation of the Ground Team Red (GTR) entities which took effect from January 2019.

Revenue share from Singapore fell from 64 per cent to 62 per cent.

The suspension of flights by private Indian carrier Jet Airways and lower foreign exchange gains also resulted in operating expenditure outpacing revenue growth.

Group expenditure rose 9 per cent to S$408.3 million, driven by the consolidation of GTR entities which accounted for S$20.6 million of the increase. Staff costs grew by S$22 million, largely due to the volume growth and consolidation of GTR entities.

SATS said in its results filing on Thursday: "The global economy is showing signs of weakness, as reflected in the softening of air cargo volume. Aviation passenger volumes in Asia continue to grow although more slowly, while rapid urbanisation in the region is still driving demand for safe, high-quality food.

"We aim to strengthen our market leadership by continuing to extend our network across Asia-Pacific and digitalising our operations to enhance service and improve productivity."

SATS also has a cruise centre management arm. "We anticipate that the cruise industry in South-east Asia will develop to keep pace with burgeoning consumer interest, with the number of cruise passengers to Singapore forecast to increase," the company said.

First-quarter earnings per share was 4.9 Singapore cents, down from 5.7 Singapore cents in the same period a year earlier.

Net asset value per share was S$1.53 as at end-June, up from S$1.48 as at end-March.

SATS shares fell eight Singapore cents or 1.48 per cent to S$5.32 on Thursday before the results were released.