SIA Group Financial Analysis: Net Profit Decline of 48.5%

Business Description

Singapore Airlines Ltd (SIA) is a leading global airline operator headquartered in Singapore. The company’s core business operations include passenger and cargo air transportation. SIA operates through multiple segments, including full-service carrier (SIA) and low-cost carrier (Scoot). The company has a strong geographic footprint, with extensive routes in Asia-Pacific, Europe, and North America.

Industry Position

SIA is a major player in the aviation industry, known for its high-quality service and extensive network. Its competitors include other full-service carriers like Cathay Pacific and Emirates, as well as low-cost carriers such as AirAsia. Despite intense competition, SIA maintains a significant market share in both premium and budget segments.

Revenue Streams and Customer Base

The company’s revenue streams are diversified across passenger flown revenue, cargo revenue, and other ancillary services. The customer base includes both premium travelers and budget-conscious passengers. SIA’s competitive advantage lies in its strong brand, service excellence, and extensive route network.

Financial Statements Analysis

Income Statement

For 1H FY24/25, SIA reported an operating profit of \$795.6 million, a decline of 48.8% YoY. Net profit was \$742.0 million, down 48.5% YoY. Despite a 3.7% increase in revenue to \$9,497 million, expenditure increased by 14.4% to \$8,702 million, driven by higher net fuel costs and non-fuel costs.

Balance Sheet

As of 30 September 2024, SIA’s total assets were \$40,955.1 million, with total liabilities at \$26,841.8 million. Equity attributable to owners was \$13,715.1 million, with a debt-to-equity ratio of 0.96. Total cash and bank balances stood at \$9,046.2 million.

Cash Flow Statement

The report does not provide detailed cash flow statements, but the increase in expenditure suggests higher outflows, particularly in fuel and staff costs.

Dividend Information

SIA maintained an interim dividend of 10.0 cents per share, to be paid on 11 December 2024.

Key Findings

Strengths

• Strong brand reputation and service excellence.
• Diversified revenue streams and extensive route network.
• Significant cash reserves and manageable debt levels.

Risks

• Decline in net profit and operating profit YoY.
• Increased expenditure, particularly in fuel costs and staff costs.
• Intensifying competition and cost inflation.

Special Activities

SIA is investing in cabin upgrades for its A350-900LHs and A350-900ULRs, aiming to enhance customer experience. The company is also leveraging AI technologies to improve operational efficiency and customer service.

Investor Recommendations

For Current Holders

Given the decline in net profit and increased expenditure, it is advisable for current holders to reassess their position. If the stock aligns with your long-term investment strategy, hold the stock but stay alert for any further financial updates.

For Potential Investors

If you are not currently holding the stock, it may be prudent to wait for a more favorable financial outlook. Monitor the company’s efforts to control costs and improve profitability before making an investment decision.

Disclaimer

This analysis is based on the financial report provided and should not be taken as financial advice. Investors are encouraged to conduct their own research and consider their financial situation and investment objectives before making any investment decisions.