SIA Engineering reports 22.8% fall in net profit

SIAEC's glum first-quarter numbers came even as spending fell 6.2 per cent to $256.4 million, due to lower staff and subcontract costs.
SIAEC's glum first-quarter numbers came even as spending fell 6.2 per cent to $256.4 million, due to lower staff and subcontract costs.ST FILE PHOTO

Revenue falls 5.7%; firm says Q1 performance hit by rising business costs and competition

Hit by rising business costs and competition, Singapore Airlines' engineering arm has reported a 22.8 per cent fall in first-quarter net profit to $41.3 million.

SIA Engineering (SIAEC) said revenue in the three months ended June 30 came in at $277.3 million, a 5.7 per cent dip from the same period a year earlier. This was mainly due to lower aircraft airframe component and overhaul revenue.

Associated firms did not do too well either, with SIAEC's share of their profits down 21.6 per cent compared with a year earlier.

The glum numbers came even as spending fell 6.2 per cent to $256.4 million due to lower staff and subcontract costs.

Basic earnings per share was 3.68 cents for the first quarter of the current financial year, down from 4.79 cents a year earlier. Net asset value per share was $1.22, higher than the $1.18 as at March 31.

For SIAEC, efforts to manage costs and strengthen competitiveness across core business units will remain "a key priority", the company said.

Overall, market conditions for the aircraft maintenance, repair and overhaul (MRO) sector remain challenging, SIAEC said.

"Rising business costs and competition from increasing MRO capacity in the region will continue to exert pressure on margins," it added.

Industry experts expect that over the next 20 years, about 37,000 new planes will be delivered globally to airlines and individuals.

With the demand for air travel in the Asia-Pacific set to outpace the global average, more than a third of these planes are expected to end up in this region. While this will provide ample opportunity for firms like SIAEC, the strong outlook will also increase competition for incumbents with new players eager to step in, industry analysts said.

For SIAEC, efforts to manage costs and strengthen competitiveness across core business units will remain "a key priority", the firm said.

"We continue to build on our capability to handle new-generation aircraft. This will broaden the depth and breadth of our capabilities and scope of services", it added.

Supported by a strong balance sheet, the group will continue to pursue strategic partnerships and long-term growth opportunities in the region, SIAEC said.

A version of this article appeared in the print edition of The Straits Times on July 28, 2015, with the headline 'SIA Engineering reports 22.8% fall in net profit'. Print Edition | Subscribe