15.08.2016

Further falls for Tat Hong

Singapore based crane rental company Tat Hong has reported lower first quarter revenues and a deeper loss.

Total revenues for the quarter were $116.7 million 16 percent lower than the same quarter last year, due to a combination of lower activity and exchange rate factors. The effect of the lower revenues translated a profit last year of $5.6 million into a pre-tax loss of $3.8 million, this is partly distorted by profits from a property sales in 2015.

Looking at the four main divisions mobile Crane Rental revenues dropped 23 percent to $37.6 million due to lower rates and utilisation in Australia and the weakness of the Australian dollar to the Singapore dollar. The Tower Crane division – mostly based in China was the only division to see a gain with utilisation rising to 80 percent taking revenues up five percent to $24.5 million.
General Rental revenues dropped five percent to $11.1 million, while the Distribution business saw revenues decline 21 percent to $43.5 million.

Chief executive Roland Ng said: “The difficult market conditions which we have spoken about previously continued into the first quarter of FY2017. Our performance was further dampened by unfavourable foreign currency movements. Had it not been for the S$5.2 million foreign exchange impact on our bottom line, the Group would have recorded a small profit for the quarter under review.”

“Whilst the group will continue to manage its cost and its fleet size, the catalyst for a turnaround in the group’s performance for the crane rental and distribution segments would have to come from external market demand, which at this time, remains weak especially in Australia and Southeast Asia. In addition, the volatile currency market continues to cloud visibility of the Group’s earnings.”

“Our tower crane rental business in the People’s Republic of China performed well in 1QFY2017 as reflected in the high tower crane utilisation rate of more than 80%. As our tower cranes are deployed on projects in the infrastructure, transportation and power generation sectors which could take up to two years or more to complete, we expect the strong performance from this division to continue.”

Vertikal Comment

There is little on the horizon to suggest that this downward trend will change, Tat Hong grew rapidly when times were good in Australia and South East Asia, but is now riding the same economic wave downwards. It has however taken steps to reduce borrowings and should be able to survive the cycle without too much difficulty. In fact it could also be in a position to take advantage of situation snapping up companies that are less able to weather the storm.

You have to wonder if it might look at divesting itself of the General rental or Distribution business in order to focus on cranes?