SIA Engineering profit slumps to S$34.4m

Higher expenses outgrew the 8.2% rise in revenue causing profit to contract.

According to OCBC, SIA Engineering Co Ltd’s (SIAEC) 1QFY13 revenue increased 8.2% YoY to S$300.5m and PATMI grew 2.9% to S$70.1m. Despite the growth in revenue, SIAEC’s expenses grew at an even faster rate. The higher expenses caused a 1.1ppt slide in its operating margin to 11.4% and its operating profit to contract by 0.9% to S$34.4m.

Here's more from OCBC:

Management attributed the higher expenses to increased subcontract, staff and material costs to support the increase in workload. On the positively side, SIAEC’s share of profits of JV and associated companies climbed 7.5% to S$40m, ensuring that it still recorded PATMI growth in the quarter.

Fleet management and line maintenance segments grew SIAEC’s revenue growth in 1QFY13 was primarily driven by its fleet management and line maintenance segments. After SIAEC recorded stellar growth in its fleet management segment in FY12, the segment has continued growing. This growth can be attributed to the larger fleet of aircraft it now services under this programme.

Going forward, management guided that demand for its services is expected to remain stable and it is confident that SIAEC’s strategic partnerships and capabilities in new-generation aircraft should help maintain its competitiveness and long-term growth potential. However, management also highlighted the possible downside risk related to the prevailing global economic uncertainties. On the group level, management will continue to focus on managing costs and efficiency in order to improve its profitability.

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