SIA Engineering profit rises 5.7% to $44.5m

Spending at SIA Engineering was 11.3 per cent lower at $239 million. The end result was an almost 70 per cent jump in operating profit to $27 million.
Spending at SIA Engineering was 11.3 per cent lower at $239 million. The end result was an almost 70 per cent jump in operating profit to $27 million.ST FILE PHOTO

Q2 boost from lower staff costs and cheaper materials; revenue drops 6.7% to $266m

Lower staff costs and cheaper materials gave the engineering arm of Singapore Airlines a boost in the second quarter.

Net profit at SIA Engineering (SIAEC) rose 5.7 per cent to $44.5 million for the three months to Sept 30 while revenue came in at $266 million, a 6.7 per cent drop from a year earlier.

The sales decline was mainly due to lower turnover for aircraft airframe components and overhaul work and fleet management.

Associated firms did not do too well, either, with SIAEC's share of their profits down 35.7 per cent to $18.7 million, compared with a year earlier.

On a more positive note, spending was 11.3 per cent lower at $239 million. The end result was an almost 70 per cent jump in operating profit to $27 million.

A weak first quarter hit half-year profits, which declined by about 10 per cent to $85.8 million.

Revenue for the six months also fell, down 6.2 per cent to $543.3 million.

The share of profits from associated and joint-venture companies also fell.

Earnings per share was 3.96 cents for the second quarter, up from 3.75 cents a year earlier. Net asset value per share was $1.19, higher than the $1.18 as at March 31.

The operating environment remains challenging, SIAEC said: "Lower work content and longer check intervals of newer generation aircraft will continue to impact our business."

New aircraft like the Boeing 787 and Airbus 350, which are made mainly of carbon-fibre composite materials and titanium, are a boon for airlines because they are lighter and more fuel-efficient. They also require less maintenance, meaning less work for repair and maintenance firms like SIAEC.

High manpower costs in a labour-tight market have also hit SIAEC and other aerospace firms operating in Singapore.

The Civil Aviation Authority of Singapore and Changi Airport Group are pushing for industry-wide initiatives to boost productivity and efficiency to help offset this trend.

In the meantime, SIAEC will continue to pursue strategic partnerships and long-term growth opportunities in the region, the firm said.

One such initiative is the Singapore-based Boeing Asia Pacific Aviation Services. SIAEC owns 49 per cent of the entity, with the remaining stake held by the American plane-maker.

The new firm will provide engineering, materials management and fleet support solutions for Boeing 737, 747, 777 and 787 aircraft to customers in the Asia-Pacific and beyond.

The results were released after markets closed.

SIA Engineering shares closed six cents down at $3.93 yesterday.

A version of this article appeared in the print edition of The Straits Times on November 03, 2015, with the headline 'SIA Engineering profit rises 5.7% to $44.5m'. Print Edition | Subscribe