SIA Engineering profits crashed 40.1% to $33.1m in Q3

It blamed one-time events from its associated and joint venture companies.

SIA Engineering saw its Q3 profits fall 40.1% YoY to $33.1m from $55.3m during the same period in 2018, an announcement revealed. Revenue also slipped 5.6% YoY to $255.9m from $271m.

The decrease was attributed to one-time events from the firm’s associated and joint venture companies. These included a revision in fee structure of an engine shop in 2018 which evened out its revenue over the year instead of a lump sum adjustment in Q3 2018, a one-time tax charge booked by certain associated companies in Q3 2019, and a foreign exchange adjustment made for the functional currency change of an unnamed associated firm.

The one time-events dragged the firm’s earnings by $20.9m, whilst share of profits of SIA Engineering’s associated and joint venture companies dropped 52.9% YoY to $21.6m, the firm revealed.

Also read: Benefits of SIA Engineering's revamp delayed by competition and demand headwinds

As of December 2018, equity attributable to owners of the parent of $1.49b stood at $1.4m which is 0.1% higher than at March 2018. This is due to a gain in foreign currency translation reserve as a result of the strengthening US dollar against the Singapore dollar, although this was largely offset by the payment of the final and interim dividends in respect of FY2017-18 and FY2018-19. 

“Repair and overhaul (R&O) and fleet management continue to be pressure points responsible for the 6-7% overall Q3 FY19 revenue drop,” Maybank Kim Eng’s (Maybank KE) analyst Neel Sinha said in a separate report. “These offset line maintenance (LM) segment growth of low-to-mid single digit.”

SIA Engineering’s total assets dipped 0.9% to $1.79b, the financial statement noted.

“The operating environment remains challenging,” the SIA Engineering said in a statement. “The company will continue to focus on our transformation journey and investments in technologies. We will manage our portfolio of joint ventures to drive sustainable growth.”

Maybank KE’s report noted that as SIA Engineering invests in new areas in manufacturing technology for cabin interior parts, in-flight entertainment and connectivity systems, the initiatives will take more than another 12-18 montrhs to contribute to the firm’s earnings. With this, the analyst believes that the adjustment process to lower maintenance, repair and overhaul (MRO) workload for new aircrafts will drag on longer than expected.