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Net Profit Plunges at SIA

Ser Jing - Checking In On SIA Engineering's First Quarter Results (pic)Our national flag carrier, Singapore Airlines (SGX: C6L), announced its latest quarterly earnings yesterday. Fondly known as SIA, Singapore Airlines also has a subsidiary, SIA Engineering (SGX: S59), which released its earnings this week.

SIA’s revenue for third quarter of 2014 (3Q 2014) was flat at $3.9 billion, as compared to the previous year. Operating profit clocked at $151 million, 15.3% higher year-on-year. However, net profit was $50 million, a plunge of $93 million or 65%, as compared to 3Q 2013.

Higher passenger carriage was offset by weaker yields (yield is calculated by taking passenger revenue from scheduled services divided by revenue passenger-km, which in turn is number of passengers carried multiplied by distance flown). This brought about flat revenue for the quarter.

Operating expenses decreased marginally by $5 million to $3.7 billion, mainly due to lower fuel cost as average jet fuel prices decreased 5.6% year-on-year. Lower fuel cost was partially offset by higher staff and non-fuel variable costs, which rose in line with capacity increase. These gave rise to an operating profit rise of 15.3%.

The net profit dropped dramatically mainly due to exceptional items of $80 million with regards to SIA Cargo and share of losses and one-off items from associated companies, mainly Tiger Airways Holdings Limited (SGX: J7X). The one-off items from Tiger Airways arose from impairment in Tigerair Mandala and losses related to assets held for sale in Tigerair Philippines. The amount totaled to $46 million. Stripping off the exceptional items and impairment losses from Tiger Airways, the net profit would have improved by $33 million or 23.1% year-on-year.

As of 31st December 2013, the company had a total debt of S$166 million and a cash balance of S$4.9 billion. This translates to a healthy net cash position of S$4.7 billion.

SIA had a net cash flow from operations of S$433.4 million, down 18.2% as compared to 3Q 2013. The capital expenditure for the quarter was at S$605.4 million, generating no free cash flow for the quarter.

The shares of the airline operator last exchanged at S$9.50, giving a historical PE ratio of 28 and a dividend yield of 2.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.