15.02.2016

Tat Hong slips into the red

Singapore based crane rental company Tat Hong has posted its third quarter results which show a loss in the quarter as per its recent warning, following weaker revenues in all sectors.

Total revenues for the nine months were $401.5 million, 15 percent down on the same period a year earlier. Crane rental declined 25 percent to $143.3 million, while tower crane slipped five percent to $70.2 million. General equipment rental was 23 percent lower at $34.6 million and distribution revenues fell five percent to $153.3 million. Pre-tax profits for the nine months was less than a sixth of last years $36.7 million at $5.9 million.

Looking at the third quarter, revenues were down 19 percent to $124.8 million, with Crane rental dropping 23 percent to 46.5 million due to the completion of projects coupled with a delay in the commencement of new projects in Thailand, lower activity levels in the mining and LNG in Australia as well as lower rental and utilisation rates of higher capacity cranes in Malaysia. The fall in revenue was exacerbated by an 8% depreciation of the Australian dollar against the Singapore dollar, without which the all would have been 21 percent.

Tower crane rental slipped four percent to $24 million, due to lower utilisation - 72.2 percent, compared to 77.2 percent the previous year. However utilisation improved significantly on the second quarter.

General Equipment rental fell 16 percent to $11 million, while distribution revenues dropped 23 percent to $43.3 million, primarily due to lower demand for cranes in Thailand, Vietnam and Singapore as well as lower sales of excavators in Indonesia, partially offset by an improvement in the sales of used equipment and spare parts in Australia.

Chief executive Roland Ng said: “The group’s earnings this quarter was impacted by foreign exchange losses as well as increased costs and provisions associated with exiting the excavator distribution business in Indonesia. This was exacerbated by the difficult market conditions in Australia. “

“We expect our performance in the ASEAN region and Australia to be subdued in the near term due to the volatile currency environment, persistently low oil prices and anaemic economic growth. However in the longer term, we are confident of the prospects for the crane rental business as economic progress and the urbanisation of rural populations will drive massive infrastructure development to bridge the current infrastructure gap in Asia. In the meantime, we will step up our ongoing Group-wide operating costs reduction exercise to make ourselves even leaner. ”

“The tower crane rental business reported two consecutive quarters of improvement in utilisation rates as we have substantially completed the transfer of tower cranes from a dormant subsidiary to more active subsidiaries. The employment of these cranes to new projects will further improve utilisation rates in the near future.”

Vertikal Comment

While this is not good news it is hardly surprising given the challenges faced in most of the company’s main markets. It looks as though the situation may well stabilise during 2016 in parts of the region, although ongoing challenges in Australia will continues to depress revenues and profits for some time.

Tat Hong is more than able to adjust and adapt to these changing conditions and be ready to take advantage of improvements when they come along