SIA's Q2 net profit falls 81%

HIGHER jet fuel costs and recognition of its share of losses in 20 per cent-owned Virgin Australia (VAH) led national carrier Singapore Airlines (SIA) to post a more than fivefold dip in net profit to S$56 million in the second quarter from a restated profit of S$293 million a year ago.

Operating profit slid 35 per cent in the three months to September to S$233 million as expenditure clicked higher by nearly 10 per cent mainly from fuel cost and capacity injection which overshadowed a 5.6 per cent jump in revenue to S$4.06 billion from a year ago.

Net fuel cost and non-fuel expenditure for the quarter jumped 24 per cent and 4.4 per cent respectively in tandem with the group's 5.3 per cent capacity growth.

Excluding the impact of the one-off item of S$116 million in relation to VAH over the quarter, adjusted net profit would have come in at S$172 million - lower by 41 per cent, said the carrier in its results announcement after market closed on Tuesday.

The SIA group recognised its share of losses in VAH which results were impacted due to major accounting adjustments.

As for the parent airline company, higher passenger carriage growth fuelled a 4.2 per cent rise in revenue but this was offset by higher fuel costs. SilkAir and Scoot were hit by operating losses for the quarter on the back of an increase in fuel and expansion costs which outpaced revenue growth.

Earnings per share stood at 4.8 Singapore cents from 24.8 Singapore cents a year ago over the corresponding quarter.

The group declared an interim dividend of eight Singapore cents per share for the period under review versus 10 Singapore cents a year ago.

For the first half period, net profit slipped 69 per cent to S$196 million on the back of a 2.5 per cent improvement in revenue to S$7.9 billion.

The group said that headwinds - chiefly cost pressures from elevated fuel prices and competition in key operating markets - persist but it remains committed to its three-year transformation plan to better customer experience, grow revenue asnd raise operational efficiency.

The carrier continues to hedge its jet fuel requirements. For the second half of the financial year, it has hedged 58 per cent of fuel requirements in Singapore jet kerosene (MOPS) at a weighted average price of US$71 against current price of US$87. The group has also entered into longer-dated Brent hedges with maturity extending to FY2024, covering 46 per cent of its projected annual fuel consumption at average prices ranging from US$56-US$64 per barrel versus prevailing price of US$73 per barrel.

SIA stock finished lower by 17 Singapore cents or 1.8 per cent on Tuesday at S$9.42.