SATS’ food segment headed for better profits but cargo faces uncertainty

The potential removal of a tax exemption rule in the US could impact its revenue.

SATS’ food solutions segment should see improved profitability for FY2025, but its cargo segment will face more uncertainties.

The food solutions segment has only recovered to about 80% to 85% of pre-pandemic levels as of 9M FY2025, according to estimates by UOB Kay Hian. However, its meal volume produced has slightly exceeded pre-pandemic levels, according to UOBKH analyst Roy Chen.

“We expect SATS’ food solutions operating profit to continue to improve in FY26, as: a) regional air travel continues to recover and grow, and b) SATS executes its growth initiatives in the non-aviation food space,” Chen said.

Its cargo segments face more uncertainties, however, due to the US’ possible removal of the de minimis tax exemption rule.

US air cargo handling represents 25% of SATS’ group revenue. Removal of the tax exemption could impact SATS’ group revenue by up to 2%, Chen said.

UOBKH now estimates a “flattish” core earnings performance for the segment for FY2026.

Overall, UOBKH has trimmed its FY 2025-2027 core estimates for SATS by 2-3% to S$272m to S$314m, on the back of the Q3 FY2025 earnings miss.

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