Turbulent skies to persist for struggling SIA Engineering in 2015

Intense competition and high staff costs are to blame.

SIA Engineering will continue to struggle through a turbulent environment in the coming year, as the company continues to face higher subcontracting costs and weaker engine maintenance revenue.

According to UOB Kay Hian, SIA Engineering will also have to grapple with rising staff costs, as these made up 59% of SIA EC’s revenue in the 2Q15.

“While SIAEC is not overtly impacted by the recent changes in foreign worker levies as foreigners make up only 10% of its workforce, costs are relatively sticky even as SIAEC faces the risk of lower revenue from increased competition. This was the main cause of the 44% decline in operating profit in 2QFY15. A large portion of opex appears to be fixed and thus even a relatively low decline in revenue will have a substantial impact on earnings,” noted UOB Kay Hian.