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Singapore Airlines Ltd’s Latest Earnings: Fuel Costs Affect Profits Again

Singapore Airlines Ltd (SGX: C6L) reported a downbeat set of earnings yesterday for the third quarter of the fiscal year ending 31 March 2019 (2018/2019).

Here are some of the key financial highlights from the third-quarter results:

1) Revenue grew 6.5% year-on-year to S$4.34 billion.

2) Total operating costs increased by 9.1% to S$3.95 billion.

3) As a result, operating profit declined by 14.6% to S$387.6 million.

4) Profit attributable to shareholders followed suit, dropping by 27%, from S$389.3 million to S$284.1 million.

5) Similarly, earnings per share ticked down by 27% from 32.9 cents to 24.0 cents.

6) As of 31 December 2018, SIA’s balance sheet had S$1.32 billion in cash and bank balances, and S$5.06 billion in total debt. This translates to a net debt position S$3.74 billion. This was a major step back from the S$559 million in net debt that SIA reported on 31 March 2018.

7) Operating cash flow, reduced by 5.8% year on year, from S$538.7 million to S$507 million. Capital expenditure, on the other hand, remained rather stable increasing only by S$4 million on year. This resulted in SIA’s free cash flow dropping by 4%, from negative S$1.0 billion to negative S$1.04 billion.

Revenue increased on the back of growth in passenger traffic while cargo flown revenue remained stable. Expenditures rose due to higher net fuel costs, this led to a decline in net profits. Net profits were also affected by losses at the group’s joint ventures, particularly NokScoot.

Operating profits broken down according to different segments in the group can be seen below:


Source: SIA 3rd quarter earnings report

The biggest decline in operating profits was seen at Scoot and SilkAir. This was due to increases in fuel costs for both brands and expansion costs at Scoot.

Outlook

Singapore Airlines commented on its outlook as follows:

“Overall passenger bookings in the forward months are tracking capacity growth, however, uncertainties surrounding US-China tariffs and their consequent effects on global trade flows, as well as Brexit, are clouding the overall demand outlook for both passenger and cargo. SIA will continue to be nimble and proactive in responding to pockets of weakness or opportunity by rebalancing supply across the network.

Significant progress has been made under the SIA Group’s three-year Transformation programme, enabled by the strong support of employees. Against a challenging operating environment, the Group’s suite of services and products launched over the past year, including new non-stop services and cabin upgrades, helped enhance the customer experience and grow revenue, while realizing operational and cost efficiencies.

The recent opening of KrisLab is also a significant step towards enhancing SIA’s digital capabilities. Serving as a creative test bed for internal innovation and cocreation with external partners, the lab will enable the Group to fully embrace digitalization and technology in all aspects of its business operations.”

 

SIA’s closing price on Wednesday’s stood at S$9.87, resulting in a price-to-earnings ratio of 13.1 and a dividend yield of 3.85%.

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The Motley Fool Singapore writer, Esjay, contributed towards this article. Esjay does not own shares in Singapore Airlines Ltd. Motley Fool Director, David Kuo, does not own shares in SIA.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.