13.11.2013

Slowdown hits Tat Hong

Singapore based crane and equipment company Tat Hong has reported falling revenues and significantly lower profits for the first half.

In the six months to the end of September the company reported a 16 percent fall in total revenues to s$360.8 million, with three of its four divisions suffering declines, only tower cranes posted any growth.

Mobile and crawler crane rental revenues dropped 13.6 percent to $139.1 million due to reductions in Australia and Malaysia partly offset by improvements in Singapore, Hong Kong and Thailand.

The tower crane division, which is almost entirely based in China, saw revenues grow by 12.9 percent due to a larger fleet – now number 211 units with a utilisation of just over 76 percent.

The General Rental and Distribution divisions saw falls of 25 and 22.5 percent respectively, mostly due to a slowdown in activity in Australia, where both divisions gain most of their sales. Pre-tax profits for the six months dropped 49 percent to $26 million.

Looking at the second quarter the story was much the same, with total revenues dropping 14 percent to s$185.3 million. This is made up of a 13.6 percent reduction in mobile and crawler crane rental to $70.3 million due to lower specialised transport work for the Australian mining industry. The crane fleet increased by five units to 687 cranes with fewer cranes under 200 tonnes offset by more larger units. Average utilisation for the quarter was 68 percent.

Tower crane rental revenues grew by just over 20 percent to $22.6 million, Distribution fell 16.5 percent to $75 million, and General Rental slumped 33 percent to $17.4 million. Pre-tax profits were 13.7 million in the quarter down 44 percent on last year.

Looking forward the company says that it expects mobile crane rental to remain positive, while tower crane rental continues to grow. Meanwhile it expects the Distribution and General Rental arms to remain depressed due to lower commodity prices hurting revenues in Australia and Indonesia.

Chief executive Roland Ng said: “Our results this quarter were impacted by unrealised foreign exchange losses, most of which arose from inter-company loans and payables in relation to our Indonesian operations. While profit contribution from Australia is still below last year’s level, it has improved quarter-on-quarter as the cranes which were being relocated in the first quarter started generating income and as cost containment measures yielded results.”

“While competition and costs have increased in our key markets in Southeast Asia, Tat Hong is in a good position to benefit from the many infrastructure and oil and gas projects in the region due to our strong track record. Likewise in China, where our tower crane rental division is benefitting from strong demand from the infrastructure, transport, power generation and
construction sectors.”

Vertikal Comment

Given the fact that Australia normally represents around half of the group’s business it is not surprising that it is seeing such declines -revenues from Australia have now dipped to 42 percent – however the group has continued to diversify geographically and is in good shape overall to weather the storm and take advantage of opportunities that might arise.

Expect the full year 2014 to be better than the first half might suggest.