15.11.2016

Another poor quarter for Tat Hong.

Singapore international crane company Tat Hong has reported further steep falls in revenues and deeper losses.

Half year revenues to the end of September were $226.6 million 18 percent down on the year. Crane rental revenues fell 26 percent to $71.6 million, while tower crane rental was eight percent higher at almost $50 million. General rental was six percent lower at $22 million and finally the equipment distribution business dropped 25 percent to $82.9 million. Last year’s pre-tax profit of $12.8 million converted to a loss this year of $7.3 million.

Moving on to the third quarter, overall revenues fell 20 percent to $109.8 million. Revenues in the Crane Rental division were 29 percent lower at $34.0 million due to lower utilisation in Singapore and the completion of projects and downward pressures on rental rates in Australia. The closure of a specialised transport unit in Australia in April also contributed to the revenue decline. Revenue from other areas was flat.

Revenues at the Chinese tower crane rental division improved 11 percent to $25.5 million, in local currency the increase was even more impressive at 21 percent. The division was busier thanks to new projects in infrastructure, power generation, transportation and commercial building sectors which took utilisation to 83 percent.

The general equipment rental business, largely based in Australia, saw revenues drop eight percent to $10.9 million compared to the same quarter last year, while the distribution business plummeted 28 percent to $39.4 million, primarily due to lower equipment and spare parts sales in Singapore, Hong Kong and Thailand and to overseas markets such the Middle East and Japan. Equipment and spare parts sales in Australia were roughly the same as the second quarter last year.
Pre-tax loses were $3.5 million, compared to a profit last year of $7.1 million.

Chief executive Roland Ng San Tiong said: “Market conditions in the past quarter continued to be challenging, particularly in Australia and Singapore, and the impact is evident in our second quarter results. As macro conditions in the region are not expected to improve in the near future, the Group’s efforts in operational restructuring and cost containment will continue.”

“Our Tower Crane Rental division in the People’s Republic of China continued its strong performance with an improvement of 21 percent in RMB-denominated turnover. Utilisation rate for the tower crane fleet has reached 83 percent and due the long term nature of the projects that the tower cranes are involved in, we expect the high utilisation rate to continue.”

Vertikal Comment

The situation at Tat Hong continues to deteriorate, with no sign of an end to it. The company has made substantial changes and continues to look at further things it can do to streamline its costs and improve profitability.

It is unlikely though that much will change in the current financial year, so expect at least a further six months of pain - possibly more.