Sats to strengthen food, cargo arms amid aviation pickup

Airport services firm Sats will strengthen its food and cargo divisions to reinforce its in-flight catering and ground handling businesses and strike a better balance between travel and non-travel revenues, it noted yesterday.

The moves come as the aviation sector sees a pickup in business with more vaccinated travel lanes and easing border restrictions across the region.

Incoming Sats president and chief executive Kerry Mok told a result briefing that the company wants to extend its capabilities in food production and distribution while investing in food innovation, such as developing alternative protein-based items.

Mr Mok has replaced Mr Alex Hungate, who resigned last month after eight years at the company.

Mr Hungate is set to join ride-hailing company Grab as chief operating officer on Jan 4.

Revenue from Sats' non-travel-related divisions has swelled since the pandemic hit, yielding new opportunities for the company to expand in food.

Key to the new strategy is supply chain resilience. This involves establishing supply partnerships and diversifying food sources, expanding the firm's network of food factories, central kitchens and assembly centres, as well as distributing to new markets in Singapore and overseas.

Sats will also invest further in expanding its capabilities in alternative proteins and increase and commercialise its portfolio of food products and brands, said Mr Mok.

New central kitchens in Tianjin, China, and in Bengaluru, India, are being set up, as well as a large-scale food production facility in Thailand.

The food and non-travel related business now represents 47 per cent of total revenue.

Sats will bolster its cargo division as well, including investing in terminals in the Saudi Arabian cities of Riyadh and Jeddah to expand its reach in the region.

"Over the past two years, our cargo volumes have grown and are now above pre-pandemic levels," Mr Mok added.

This was driven by demand to move Covid-19 vaccines and higher volumes of goods ordered via e-commerce.

Sats moved 808,300 tonnes of cargo in the six months to Sept 30, up 64.4 per cent from the same period last year.

It also served up 26.3 million non-flight meals to institutions and restaurants, up 27.2 per cent.

Sats reported net profit of $13.2 million for the first six months to Sept 30, reversing a loss of $76.9 million last year.

It attributed the recovery to a 29.3 per cent surge in revenue to $569.5 million for the half-year, in tandem with growth in cargo volumes and non-travel revenue and resumption of ship calls. This helped offset the lower aviation volumes for the food catering business.

Gateway services revenue jumped 61.4 per cent to $257.3 million while food solutions turnover increased 12.6 per cent to $310.3 million. This resulted in an operating profit of $4 million for the first half of the financial year ended Sept 30, compared with an operating loss of $36 million in the same period last year.

Sats associates and joint ventures also returned to the black, contributing $900,000 to earnings, from a loss of $44.2 million in the previous year.

This marks a gradual recovery from Covid-19, with marked improvement from most of the aviation associates and joint ventures.

No interim dividend was declared.