SATS posts 2.8% rise in Q2 net profit

Global airport ground handler and in-flight caterer SATS reported a 2.8% rise in second-quarter net profit, as expanding cargo volumes and strong meal demand offset higher operating expenses caused by Middle East conflict disruptions and elevated energy prices. The Singapore-listed aviation services group posted profit attributable to owners of 81.1 million Singapore dollars ($60.8 million) for the three months ended Sept. 30, up from 78.9 million Singapore dollars a year earlier, helped by lower tax expenses. Quarterly revenue increased 9% year over year to 1.71 billion Singapore dollars from 1.57 billion Singapore dollars. Both core operating units registered top-line growth amid robust international travel and freight movements across the Americas and the Asia-Pacific region. For the first half of fiscal 2027, net profit rose 4.3% to 156.2 million Singapore dollars as revenue climbed 10.1% to 3.39 billion Singapore dollars. Despite top-line gains, operating profit for the second quarter slipped 7.6% to 145.4 million Singapore dollars from 157.4 million Singapore dollars a year earlier. Operating margin contracted 1.5 percentage points to 8.5% from 10.0%. The company attributed the squeeze to escalating operational disruptions stemming from the Middle East conflict, including cargo rerouting and flight diversions, as well as an unfavorable year-ago comparison. In the prior-year period, earnings were boosted by tariff-related cargo front-loading and related short-term operational efficiencies. Sequentially, however, operating margin recovered from 8.0% in the first quarter to 8.5% in the second quarter, aided by disciplined cost controls and operational refinements. Following the first-half performance, the board of directors declared an interim dividend of 2 Singapore cents per share, payable Dec. 10 to shareholders of record as of Nov. 20. Cargo and Ground Handling Lead Growth SATS’ Gateway Services segment, which oversees cargo handling, ramp operations, passenger check-in and aircraft cleaning, generated revenue of 1.34 billion Singapore dollars during the quarter, up 10% from the prior-year period. Total cargo handled across the group’s network rose 8% year over year to 2,572,500 metric tons, extending a streak of cargo volume growth that has outpaced broader International Air Transport Association benchmarks for 12 consecutive quarters. Regional cargo performance was spearheaded by the Americas, where cargo handled jumped 19.4% to 757,700 metric tons from 634,800 metric tons. Asia-Pacific cargo processed rose 8.7% to 833,800 metric tons. In Europe, the Middle East and Africa, cargo volume remained essentially flat, edging up 0.1% to 980,900 metric tons. Total commercial flights handled by the group increased 4% to 167,100 movements. Flight handling activity surged 20.5% in the Americas to 82,300 flights and rose 11% in EMEA to 4,000 flights. Conversely, flights handled in the Asia-Pacific region fell 8.9% to 80,800, primarily reflecting schedule cutbacks by low-cost carriers grappling with high jet fuel expenses. Aviation Catering and Meal Demand Advance Revenue at Food Solutions, which operates industrial central kitchens supplying airlines and institutional clients, climbed 5.6% to 376.5 million Singapore dollars from the prior-year period. Gross meals produced rose 7.8% year over year to 31.6 million. In-flight aviation meals climbed 8.3% to 19.0 million, while non-aviation meal production for institutional catering expanded 7.1% to 12.5 million. For the six-month period, food division output reached 60.5 million meals, up 9.3% from 55.4 million meals produced in the first half of fiscal 2026. Management noted that while food ingredient costs and utility charges remain elevated across global hubs, capacity utilization in central kitchens is steadily improving. The company expects margin compression in food operations to ease over coming quarters as contractual price adjustment mechanisms with commercial airlines take effect. (PHOTO: SATS) Cost Pressures and Geopolitical Headwinds Operating expenditures excluding depreciation and amortization increased 11.7% during the quarter to 1.41 billion Singapore dollars, driven by heightened operating costs and network inefficiencies. Earnings before interest, taxes, depreciation and amortization fell 2.1% to 300.9 million Singapore dollars. The quarterly EBITDA margin narrowed by 2 percentage points to 17.6% compared to 19.6% a year earlier. However, on a sequential basis, EBITDA margin widened by 0.3 percentage points from the first quarter. The group’s share of after-tax profits from associates and joint ventures fell 6.4% to 25.8 million Singapore dollars in the second quarter and dropped 13.2% to 52.6 million Singapore dollars for the half-year. SATS attributed the decrease to regional volume reductions caused by Middle East air corridor disruptions, as well as one-off provisions booked during the first quarter. Kerry Mok, president and chief executive officer of SATS, said the results demonstrated the structural durability of the company’s hub-and-spoke international network. “Our second-quarter results show the strength of our diversified global network and resilience of the business model,” Mok said in the earnings release. “Even as geopolitical disruption persisted, we saw higher cargo and meal volumes across the Group, with strong growth in the Americas and Asia-Pacific. Group margins improved from the first quarter, with Gateway Services margins rising on focused cost discipline.” Mok described ongoing sectorwide cost pressures as temporary rather than structural, emphasizing that underlying volume drivers remain sound. (PHOTO: SATS) Commercial Expansion and Technology Deployments SATS continued to expand its commercial footprint across major logistics nodes during the period, securing new contracts and commissioning specialized infrastructure. In France, the company brought online a 25,400-square-meter cargo facility at Lyon-Saint Exupéry Airport featuring dedicated temperature-controlled cold-chain capacity designed for pharmaceutical, healthcare and life sciences shipments. In e-commerce logistics, fast-growing cross-border platform Temu selected SATS to provide specialized cargo handling services across three airport stations in the Americas. SATS also secured an airfreight ground handling agreement with cargo carrier Atlas Air at Amsterdam Airport Schiphol, while executing commercial contract renewals with Turkish Airlines and Singapore Airlines across several stations in North America and Europe. To address labor constraints and boost apron safety, SATS is accelerating the deployment of automation and software systems across its global operations. The company is rolling out artificial intelligence-driven workforce orchestration systems for ramp operations at Singapore Changi Airport, alongside AI-assisted cargo load planning systems at London Heathrow Airport. In Singapore, SATS has also begun deploying autonomous transport vehicles to transfer palletized air freight between air cargo terminals and third-party logistics forwarders’ warehouses. Balance Sheet and Cash Flow Dynamics As of Sept. 30, SATS held total assets of 9.13 billion Singapore dollars, up from 9.07 billion Singapore dollars at the close of the preceding fiscal year on March 31. The increase in balance sheet scale was driven primarily by an expansion in right-of-use assets and higher trade receivables, offset by amortized intangible assets and lower cash balances. Total liabilities widened by 50.2 million Singapore dollars to 6.19 billion Singapore dollars, reflecting higher lease liabilities from the successful 15-year concession renewal secured by its Asia Airfreight Terminal subsidiary in Hong Kong. Total debt increased to 4.34 billion Singapore dollars from 4.14 billion Singapore dollars six months earlier, lifting the group’s gross debt-to-equity ratio from 1.41 times to 1.48 times. Total equity closed the period at 2.94 billion Singapore dollars. Operating cash flow after lease payments contracted to 1.5 million Singapore dollars for the quarter, weighed down by temporary working capital absorption linked to customer receivable cycles. Free cash flow registered a deficit of 54.8 million Singapore dollars, which management noted aligns with typical seasonal disbursements for employee annual performance incentives accrued from the prior fiscal year. Basic and diluted earnings per share for the quarter stood at 5.4 Singapore cents, compared to 5.3 Singapore cents basic and 5.2 Singapore cents diluted in the year-ago period. For the first half, basic earnings per share rose to 10.5 Singapore cents from 10.1 Singapore cents. Net asset value per share edged up to 1.87 Singapore dollars from 1.86 Singapore dollars at the end of March. Market Outlook Looking ahead into the second half of fiscal 2027, SATS management projected that cargo and passenger traffic across its worldwide footprint will remain resilient, supported by organic network integration following its 2023 purchase of Paris-based Worldwide Flight Services. That transaction expanded SATS’ combined footprint to more than 225 stations across 27 countries, covering routes handling roughly half of the world’s commercial air freight. However, the company cautioned that external operating headwinds will require close monitoring. “Operating costs remain under pressure industry-wide, impacted by higher energy prices, while rerouted cargo and flight cancellations continue to shift activity across the network,” the company stated in its outlook. “The pace of expansion will depend on how the Middle East conflict and trade conditions evolve.” The company reiterated that it will maintain tight controls over operational overhead while continuing targeted investments in network capabilities, automation tools and ground service infrastructure to support long-term earnings growth. For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Sally Passey at [email protected]