14.02.2011

Profits halved at Tat Hong

Singapore based international crane and equipment company Tat Hong has posted its third quarter results which show falling profits on higher revenues.

Revenues for the nine months to the end of December were up 18 percent to s$431.45 million ($336.5 million) made up of:
- Crane hire s$141.3 million –up 15 percent
- General rental s$50.5 million – down eight percent
- Tower crane rental s$44.3 million up 75 percent
- Distribution/sales s$195.3 million up 21 percent

In spite of the strong increases in revenues pre-tax profits for the nine months fell 19 percent to s$35.9 million ($28 million).

In the third quarter revenues grew by 12 percent to s$137.1 million ($106.9 million) while pre-tax profits plunged 56 percent to s$7.08 million ($5.5 million). Falling profits are due to lower margins and increased costs at every level including interest costs.

The revenue breakdown in the third quarter was:
- Crane Hire s$44.1 million - up 10 percent
- General rental s$19.1 million - up nine percent
- Tower crane rental s$13.7 million – up 62 percent
- Sales and Distribution s$60.2 million – up six percent

The improvement in crane rental revenues came from the operations in Australia, Hong Kong and Malaysia, while Singapore suffered from the off-hire of a substantial number of cranes that were previously deployed in an oil & gas project.

General equipment rental saw increased revenues from its Queensland and New South Wales network plus the opening of new branches in Victoria and Western Australia. The group has ramped up manpower at its Australian subsidiary in order to meet the expected increase in business activity following the recent floods.

Revenues from tower crane rental grew the fastest due to the larger fleet and the additional contribution from Beijing Tat Hong Zhaomao Equipment Rental and Sichuan Tat Hong Yuen Zheng Machinery. Utilisation rates were in the high seventies in spite of the larger fleet.

The distribution division struggled during the period but recorded significant sales of cranes to a number of contractors, an offshore marine company and a European crane rental company.

The company says that recovery will be ‘bumpy’ thanks to intensifying competition and lingering market uncertainties impacting most industry players. As such, the Group is not likely to perform as well as last year, contrary to earlier expectations.

It also cites increased costs in its Chinese tower crane business that it says will have to be addressed. All of which adds up to “another tedious quarter” in the run up to year end.

Chief executive Roland Ng said: “Market conditions and our operating environment have remained competitive and our recovery path continues to be an arduous journey. The recent unkind weather in Australia has also dampened our outlook for the near future, but we hope that our general equipment rental and distribution divisions will be able to capitalise in the longer term on the opportunities arising from tough times.”

“Our crane rental division should continue its stable performance banking on
Australia, Hong Kong and some key markets in Southeast Asia. However, we are prepared to face another bumpy journey in the last quarter of FY2011, which might affect our overall FY2011 performance. Nonetheless, we remain hopeful that things should start to brighten up moving forward.”