SINGAPORE (Feb 13): Airline gateway services and food solutions provider SATS saw its earnings fall 13.9% to $59.3 million for 3QFY19-20 ended December 2019, from $68.9 million a year ago.
Earnings per share fell to 5.3 cents in 3QFY19-20, compared to 6.2 cents in 3QFY18-19.
Group revenue grew 17.6% to $545.6 million, on the back of growth across both segments.
Food solutions’ revenue increased 23.1% to $310.8 million, mainly due to the consolidation of Country Foods (formerly known as SATS BRF Food) and Nanjing Weizhou Airline Food Corp.
CFPL and NWA contributed $42.3 million and $14.9 million respectively to food solutions’ revenue in 3Q.
Meanwhile, gateway services’ revenue rose 10.9% to $234.3 million, largely attributable to $23.5 million from the consolidation of Ground Team Red Holdings and Ground Team Red.
However, the increase in revenue was outpaced by a 21.1% growth in group expenditure to $482.7 million during the quarter.
Some $76.8 million of the expenditure was due to the consolidation of the new subsidiaries.
Staff costs increased by 10.8% to $240.9 million due to volume growth and consolidation of newly-added subsidiaries.
Cost of raw materials jumped 59.1% to $110.4 million, primarily due to the consolidation of CFPL and NWA.
Depreciation and amortisation costs rose 47.3% to $30.5 million, mainly due to the adoption of a new accounting standard.
Other costs increased 32.2% to $53.4 million, attributable mainly to higher maintenance and hiring costs for ground support equipment, fuel costs, and IT expenses relating to IT infrastructure to support digitalisation projects.
Consequently, operating profit for the group fell 3.7% to $62.9 million in 3QFY19-20.
Shares of result from associates and joint ventures dropped 29% to $14.7 million, from $20.7 million a year ago, on the back of with lower contributions from gateway services’ associates and joint ventures.
Excluding one-off items, SATS’ core PATMI for 3QFY19-20 was 6.0% lower than a year ago.
Net asset value per share dipped to 144.8 cents as at Dec 31, 2019, from 148.0 cents as at Mar 31, 2019.
As at end December, cash and cash equivalents stood at $212.4 million.
In its outlook, SATS says it is taking proactive steps to mitigate the risks and impact of the CoVid-19 epidemic has caused a significant reduction in air traffic in China, with a sharp decline in passenger and cargo volumes across Asia.
The group says the coronavirus outbreak will be a “consequential impact” on its short-term financial performance, but adds that the company is in a strong position to weather the disruption to its business.
“Ongoing investments in supply chain processes and systems will provide greater traceability that will further strengthen our ability to respond to contingencies across our network,” SATS adds. “Recent investments in overseas kitchens in Japan and China, along with ground handling investments in India, Malaysia and Saudi Arabia have enhanced our capabilities, strengthened our market position and diversified our revenue base.”
Shares in SATS closed 3 cents lower, or down 0.7%, at $4.54 on Thursday. Year-to-date, the counter has tumbled some 10.3%.
