SINGAPORE – Inflight caterer and ground handler Sats reported a net profit of $500,000 for the third quarter to December, reversing two consecutive quarters of losses, as aviation recovery continues.
Sats had posted $9.9 million and $22.5 million in net losses for the second quarter and first quarter of financial year 2023 respectively.
However, its third-quarter net profit was 90.2 per cent lower than the $5.1 million recorded in the year-ago quarter – largely due to merger and acquisition costs, said Sats in a business update on Monday.
Without government relief, the third-quarter bottom line would have been a loss of $13.7 million, less than the $33 million loss for the year-ago period.
Revenue for the quarter surged 54.5 per cent to $475.7 million, from $307.8 million in the previous year. This was mostly driven by revenue growth in the food solution business segment, which increased by 39.9 per cent to $232.9 million, and in gateway services, which rose 73 per cent to $242.7 million.
The group highlighted that business operations had turned the corner as travel demand picked up post-pandemic, with flights, passengers and meals in the third quarter returning to around 71 per cent, 72 per cent and 82 per cent respectively of pre-pandemic levels.
Group expenditure climbed by 50.3 per cent year on year to $476.8 million, mostly arising from increased business activities and inflation. Consequently, costs exceeded turnover, resulting in an operating loss of $1.1 million.
Staff costs rose by $82.3 million on the year as Sats ramped up hiring to support its improved operations. This was also due to a year-on-year reduction of $23.9 million in government grant support.
Sats added that there was also a rise in the cost of raw materials and licence fees, as well as company premises and utility expenses, owing to greater business volume, inflation and increased utility tariffs.
Share of results from associates and joint ventures fell 15.7 per cent to $10.2 million due to the consolidation of Asia Airfreight Terminal Company’s results in this financial year. Once the subsidiary is excluded from last year’s results, the group’s performance would be better due to overall travel recovery, said Sats.
For the nine months ended Dec 31, 2022, net loss amounted to $32 million, from a profit of $18.3 million from the year-ago period.
Sats chief executive officer Kerry Mok emphasised that the group’s third-quarter results show that its underlying business performance has improved, even amid economic uncertainties.
“While cargo volumes have softened, the reopening of China’s borders is expected to improve volume throughout,” he said.
Mr Mok stated in a briefing call on Monday that Sats is “very, very optimistic” about China’s reopening. While expecting the restoration of flights to pre-pandemic levels to take time, he hopes that it will be achieved this year.
He noted that flights to and from other destinations, such as Jakarta and Japan’s Haneda Airport, have also not been fully reinstated to pre-pandemic levels. This, together with other shortfall including from China’s slow reopening, had led to Sats not being up to pre-pandemic levels yet in terms of meals, flights and passengers.
Separately, Sats announced that it has been selected to design, build, finance and operate a five-tier integrated multi-modal cargo hub at the upcoming Noida International Airport in Uttar Pradesh, India. Terms of a concession agreement are expected to be finalised in the coming weeks, although Sats said there is no certainty that such an agreement will be signed by the joint venture with Air India.
Sats shares were trading down 19 cents, or 6.3 per cent, to $2.81 as at 10.47am on Tuesday, after the quarterly business update was released. THE BUSINESS TIMES