31.05.2016

Tat Hong drops 13%

Singapore based crane and equipment group Tat Hong has reported its full year results with lower revenues and profits.

Total revenues for the year was $528 million, 13 percent down on the prior year, with lower revenues in all sectors. Crane rental fell 21 percent to $188.5 million due to exchange rates, the disposal of a Singapore based operation in July and projects coming to an end in Australia, Malaysia and Thailand. Tower Crane rental – mostly in China - slipped three percent due to projects ending in the first three quarters, the division bounced back in the fourth quarter.

General rental – mostly in Australia – fell 21 percent to $44.4 million, while distribution revenues dropped eight percent to $201.8 million. The company recorded a pre-tax loss for the year of $37.9 million, compared to a profit last year of $18.3 million.

In the fourth quarter Total revenues fell seven percent to $126.7 million. Cranes rental dropped three percent to $45 million, Tower crane rental improved four percent to $23 million, that’s to a surge in utilisation. General rental declined a further 11 percent to $9.8 million, and distribution dropped 15 percent to $48.4 million. The pre-tax loss for the quarter was $43.8 million compared to a loss last year of $18.3 million.

Chief executive Roland Ng said: “Whilst the continued market weakness in Australia and soft demand in the ASEAN region had weighed down earnings, it was the non-cash impairment charges, unrealised foreign exchange losses, as well as losses and provisions associated with exiting the excavator business in Indonesia that caused the group to be in the red in fiscal year 2016. Had it not been for these one-off items I, the group would have turned in an improved performance compared with 2015.”

“Looking forward to 2017, we expect demand in many of our markets to be subdued. Our operations in Australia may come under further pressure unless more infrastructural projects come on-stream as many of its LNG-related projects are approaching completion. We have taken steps to right-size our operations in 2016 and efforts to trim operating costs will continue.”

“Prospect for our tower crane rental business in China is expected to be brighter as we saw a strong rebound in utilisation rate in the second half of this year. In addition, we have a strong pipeline of committed projects to sustain high utilisation rates into our 2017 financial year.”

Vertikal Comment

Tat Hong has taken a lot of pain this year writing down assets , spinning off or closing under-performing operations and beginning a shift towards a greater focus on the crane business. It does now look to be well placed for a better year ahead. It has made and continues to make some substantial changes in senior management which may or may not help improve things this year.

One thing is for certain the company is not simply sitting by to see what happens, it is putting right some over expansion and diversification moves that have been made in the past and will probably end up as a smaller more dynamic and profitable business.

The company is of course also in the sights of a suitor and may well be acquired and become part of a larger group?

Interesting times