SIA Engineering profits take a 40.7% nosedive in 2Q15

No thanks to fewer aircraft checks.

SIA Engineering may be going through the cyclical period where customers are deferring aircraft checks.
According to a report by OCBC, SIA Engineering Company's (SIAEC) reported a 3.0% YoY decline in its 2QFY15 revenue to S$285.2m and a 40.7% drop in PATMI to S$42.1m. Its 1HFY15 results were below expectation as its revenue and PATMI formed 47.8% and 34.5% of our FY15 forecasts.

SIAEC’s 1HFY15 revenue decreased 0.7% to S$579.3m, due to lower airframe and component overhaul services (ACS) revenue from fewer aircraft checks, partly offset by the higher fleet management programme (FMP) revenue. Its 1HFY15 PATMI declined 31.7% to S$95.6m, on higher subcontract costs and a 36.2% YoY drop in share of profits from associated and JV companies to S$29.1m. 

Here’s more from OCBC:

SIAEC’s key JV, SAESL (services Rolls-Royce engines) experienced a 30% reduction in works on engine cowls due to improvement modifications that reduced engine shop visits. Its main associate, Eagle Services Asia, also saw reduction in earnings as Pratt & Whitney engines are near the end of life-cycle.

The number of ‘C’ checks declined from 37 in 1HFY14 to 34 in 1HFY15 and more significantly for ‘D’ checks, the number dropped from 23 in 1HFY14 to 10 in 1HFY15. The number of ‘A’ checks remained resilient at 192 in 1HFY15 compared to 193 in 1HFY14.