SATS’ net income jumps by 12.8% to $60.6m in 3Q16

Lean operating costs outpaced a revenue dip.

An earnings plunge did not deter the airline services firm in registering a surge in net income, thanks to a decline in operating costs, along with an uptick in aviation sales.

According to Maybank Kim Eng, the sharp 29% decline in non-aviation revenue, which is now down to $69.9m, is not a concern as it is driven by the deconsolidation of its food distribution business to its new JV with BRF.

Group expenditure also sank by 5.1% to $379.2m, according to a press release by SATS, on back on reductions in almost all expense categories except staff costs and depreciation and amortisation charges.

“Manpower costs rose $11.5 million due mainly to higher accrual of staff expenses and contract services while depreciation increase was in line with additional capital expenditure. Cost of raw materials fell $18.7 million in line with lower revenue mainly from the transfer of the food distribution business,” the release said.

Aviation revenue, on the other hand, improved by 5.3% to $370m, driven by higher workload from the return of Jetstar as its ground handling customer and better TFK contributions, according to Maybank Kim Eng.

“Despite the positive performance, management appears cautious, flagging the challenging operating environment due to economic uncertainty and low consumer confidence. Strong contributions from Japan Revenue for its inflight catering business in Japan improved by 14.5% YoY to SGD60.0m,” Maybank Kim Eng said.