SINGAPORE - Sats saw its third-quarter earnings boosted by higher revenue for its food solutions and gateway services, and strong cargo volumes at subsidiary Worldwide Flight Services (WFS).

Net profit for the October to December period rose 41.9 per cent quarter on quarter to $31.5 million, from $22.2 million in the previous quarter, Sats said on Feb 29.

Sequential improvement in both top line and bottom line was evident as quarter-on-quarter revenue grew 6.5 per cent to $1.4 billion.

Sats said the number of flights handled and aviation meals served as at end-December returned respectively to 86 per cent and 97 per cent of pre-Covid-19 levels, excluding WFS.

Cargo volume, meanwhile, was 99 per cent of pre-Covid-19 levels on increased travel demand and seasonal demand.

Sats’ operating profit for the third quarter surged 31 per cent quarter on quarter to $85.8 million due to greater efficiencies and operating leverage from a more balanced business mix in aviation food and air cargo.

For the nine months to end-December, Sats’ earnings came in at $23.7 million, reversing from a loss of $32 million for the corresponding period in 2022.

Revenue for the nine months in 2023 tripled to $3.85 billion from $1.28 billion the previous year.

Food solutions revenue increased by 27.6 per cent year on year to $810.6 million for the nine months, while gateway services revenue grew 28 per cent to $824.7 million. 

The improvement in overall performance was driven largely by the consolidation of operations with WFS, which Sats acquired in April 2023 for $1.8 billion.

WFS’ revenue in the first nine months was $2.2 billion. Excluding WFS, Sats’ revenue increased by 27.8 per cent to $1.6 billion.

Also boosting both top line and bottom line were greater efficiencies and operating leverage from a more balanced business mix in aviation food and air cargo. The group also saw stronger contribution to its bottom line from its share of earnings of associates and joint ventures.

Sats’ president and chief executive Kerry Mok said in a statement: “During the quarter, our business operations continued to show improvement in profitability, driven by travel recovery and strong seasonal demand.

“The group continues to benefit from operational synergies and new commercial wins from the expanded network and our strengthened global position.”

He added: “Our refinancing efforts are also bearing fruit, with significant financial savings realised to date.”

In January, Sats issued US$500 million (S$673 million) in bonds to refinance existing debt and lower borrowing costs.

Sats said the bonds, combined with a concurrent cross-currency swap to euros, helped reduce interest rates to approximately 3.5 per cent per annum and matched the currency of the company’s existing bridge loans to hedge its foreign currency exposure.

The proceeds from the bond issuance were applied entirely to refinance part of Sats’ existing €1 billion (S$1.46 billion) bridge loan, maturing in May 2024.

“Combined with the refinancing of WFS senior secured notes in June 2023, this would result in total annual financial savings in excess of US$50 million, demonstrating the group’s commitment to reducing borrowing costs and enhancing financial flexibility,” Sats said.  

Sats, which controls more than 80 per cent of ground operations at Changi Airport, has seen its operational numbers steadily improving over the past six months.

While Asia’s travel recovery still lags behind, Sats remains upbeat that it will recover during the second half of 2024, and remains focused on managing costs, leveraging operational synergies, winning new contracts and strengthening its financial position.

With the WFS integration complete, Mr Mok said the company was focused on building up its two engines of growth – namely, maintaining market leadership at its Singapore hub and growing its cargo handling operations and other operations globally, especially in hub airports.

The company is also growing its downstream capabilities to capture more market opportunities, especially in food services and food technology.

It has tied up with global cargo specialists like Kuehne+Nagel and Japan’s Mitsui to strengthen its logistics and supply chain footprint.

Sats shares closed up two cents, or 0.8 per cent, at $2.62 on Feb 29, after its business update.