17.11.2014

Profits rise at Tat Hong as sales slump

Singapore based crane and equipment group Tat Hong has reported higher second quarter profits while revenues continue to fall.

In the first half revenues were down 12 percent to $317 million, with crane rental falling six percent to $130.5 million, and tower crane rental increasing 15 percent to $49 million. Distribution sales dropped 25 percent to $105.8 million, while general rental fell 17 percent to $31.7 million. Pre-tax profits however are up three percent to $26.7 million.

In the second quarter revenues fell 18 percent, with crane rental down nine percent to $6.3 million, largely due to the sales of Singapore based HUP. Tower crane rental which is mostly Chinese based, grew nine percent to $24.5 million - thanks to a bigger fleet and higher utilisation. Distribution, which is mainly an Australian business, fell 35 percent to $48.7 million and general rental slipped 12 percent to $15.3 million. In spite of the sharp decline in revenues, pre-tax profits improved 20 percent to $16.5 million.

Chief executive Roland Ng said: “Whilst the group benefited from disposal and foreign exchange gains, these were partially negated as we also took the prudent step of providing for stock obsolescence and inventory write-downs for our Distribution business which is not performing well. Going forward, we expect crane rental and tower crane rental to account for an increasingly larger share of the Group’s earnings.”

“We are happy that our Tower Crane Rental division continued its growth momentum in the second quarter, propelled by strong demand in China. Nearer home, our regional crane rental operations continued to be healthy though marked by pockets of weakness especially in Singapore due to the slowing construction and oil and gas sectors and reduced demand from some overseas markets such as Papua New Guinea. Australia is also showing tentative signs of improvement though some weakness, especially in the General Equipment Rental market, still persists.”

Vertikal Comment

In spite of some tough areas and declining sales Tat Hong has been swift footed and adapted to the changing situation as is reflected in its ability to maintain margins and profits. It makes good sense to focus on what it does best, where margins are still good and that seems to be the crane rental business. Perhaps it will look at further crane rental acquisitions and green field start-ups as the markets where it operates begin to pick up.