SINGAPORE – SIA Engineering Company (SIAEC) reported a 1.7% year-on-year drop in net profit to $81.9 million for the six months ended Sept 30.
This came as revenue fell 9.7% to $658.6 million. On a per-share basis, earnings were down at 7.32 cents, from 7.45 cents a year earlier.
The group declared an interim dividend of 2.5 cents a share, which will be paid out on Nov 27.
SIAEC said in a bourse filing on Nov 3 that the reduction in profit was due to a 10.7% dip in its share of profits of associated and joint-venture companies, coupled with lower interest income, higher finance charges and higher taxes.
The $7.6 million drop in share of profits of associated and joint-venture companies, to $63.7 million in the first half, was attributed to higher costs incurred for capacity and capability expansion at an engine joint venture.
This was only partly offset by higher output and profit margins of other associated companies.
SIAEC expects such expansion costs to tail off in the next financial year, as facility development work is expected to finish by the end of that period.
Revenue affected by material costs
The group’s top line was affected by lower revenue from materials, it noted, adding that excluding materials, its revenue would have been 1.6% higher year on year.
Group expenditure was down 11.6% at $623.9 million, in part due to the absence of an impairment cost recorded a year earlier.
Operating profit doubled to $25.7 million, thanks to “healthy MRO demand” and lower losses at startup subsidiaries.
For the second quarter ended Sept 30, group net profit rose $1.2 million year on year to $41.6 million, as group operating profit increased $5.6 million to $12.5 million as cuts in expenditure outweighed a dip in revenue.
Outlook steady
SIAEC said that demand for its maintenance, repair and overhaul (MRO) services remained steady in H1, with its line maintenance operations in Singapore handling 3.3% more flights year on year.
Its Malaysian subsidiary, Base Maintenance Malaysia, opened its facility and first hangar in May and finished its first aircraft maintenance check for Air India in July. This is expected to broaden the unit’s customer base.
The group also expanded its footprint in China with a 30% stake in Arport Aircraft Maintenance & Engineering (Fujian), which will provide services to airports in Xiamen, Fuzhou, Wuyishan and Longyan.
In June, SIAEC signed a joint-venture agreement with Safran Aircraft Engines to establish a full shop for CFM LEAP engines. An existing joint venture in Singapore, Safran Landing System Services Singapore, opened a $22 million facility in September, raising its capacity by 40%.
The group said demand for its MRO services will continue with the growth of air travel, especially in the Asia-Pacific, and particularly as older aircraft see delayed retirement due to slowdowns in new aircraft deliveries.
The Middle East conflict has bumped up energy and freight costs, as well as continued supply chain bottlenecks for selected aircraft parts, SIAEC noted, adding that it “remains focused on driving productivity improvements, increasing operational resilience and maintaining cost discipline”.
The company’s shares fell 1.3% or four cents to close at $2.94, before the results were announced. THE BUSINESS TIMES
