Sats reverses two quarters of losses with Q3 net profit of S$500,000

MAINBOARD-LISTED in-flight caterer and ground handler Sats : S58 0% reported a net profit of S$500,000 for the third quarter to December, reversing two consecutive quarters of losses, as aviation recovery continues.

Sats had posted S$9.9 million and S$22.5 million in net losses for Q2 and Q1 FY2023, respectively.

However, its Q3 FY2023 net profit was 90.2 per cent lower year on year from S$5.1 million – largely due to merger and acquisition costs, said Sats in a business update on Monday (Feb 13).

Without government relief, Q3 bottom line would have been a loss of S$13.7 million, less than the S$33 million loss for the year-ago period. 

Revenue surged 54.5 per cent to S$475.7 million, from S$307.8 million in the previous year. This was mostly driven by revenue growth in the food solution business segment, which increased by 39.9 per cent to S$232.9 million, and in gateway services, which rose 73 per cent to S$242.7 million.

Its subsidiary effective March 2022, Asia Airfreight Terminal Company contributed S$30.5 million to gateway services revenue.

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The group highlighted that business operations had turned the corner as travel demand picked up post-pandemic, with flights, passengers and meals in Q3 returning to around 71 per cent, 72 per cent and 82 per cent of pre-pandemic levels.

Group expenditure climbed by 50.3 per cent year-on-year to S$476.8 million, mostly arising from increased business activities and inflation. Consequently, costs exceeded turnover, resulting in an operating loss of S$1.1 million.

Staff costs rose by S$82.3 million on the year, as Sats ramped up hiring to support its improved operations. This was also due to a year-on-year reduction of S$23.9 million in government grant support. 

Sats added that there was also a rise in the cost of raw materials, licence fees, as well as company premise and utility expenses, owing to greater business volume, inflation and increased utility tariffs. 

Share of results from associates and joint ventures fell 15.7 per cent to S$10.2 million, due to the consolidation of Asia Airfreight Terminal Company’s results in this financial year. Once the subsidiary is excluded from last year’s results, the group’s performance would be better due to overall travel recovery, said Sats. 

For the nine months ended Dec 31, 2022, net loss amounted to S$32 million, from a profit of S$18.3 million from the year-ago period. 

Sats chief executive officer Kerry Mok emphasised that the group’s Q3 results show that its underlying business performance has improved, even amid economic uncertainties. 

“While cargo volumes have softened, the reopening of China’s borders is expected to improve volume throughout,” he said. 

Mok stated in a briefing call on Monday that Sats is “very, very optimistic” about China’s reopening. Nonetheless, he expects China’s reopening that would likely see the number of flights restored to pre-pandemic levels will take time, which he hopes will be achieved this year.  

He noted that flights to and from other destinations, such as Jakarta and Japan’s Haneda airport, have also not been fully reinstated to pre-pandemic levels. This, together with other shortfall including from China’s slow reopening, had led to Sats not being up to pre-pandemic levels yet in terms of meals, flights and passengers.

Separately, Sats announced it has been selected to design, build, finance and operate a five-tier integrated multi-modal cargo hub at the upcoming Noida International Airport in Uttar Pradesh, India. Terms of a concession agreement are expected to be finalised in the coming weeks, although Sats said there is no certainty such an agreement will be signed by the joint venture with Air India.

Sats shares closed S$0.03 or 1 per cent down to S$3 on Monday, before the quarterly business update was released.

Amendment note: An earlier version of this story said Sats’ expenditure climbed to S$159.5 million, when it in fact rose 50.3 per cent or S$159.5 million to An earlier version of this story said Sats’ expenditure climbed to S$159.5 million, when it in fact rose 50.3 per cent or S$159.5 million to S$476.8 million.