Wednesday, March 20, 2019
Martin Hennecke

HAECO suffers setback with $541m net loss
Jeannie Tang and Bloomberg

Hong Kong Aircraft Engineering company (0044), a unit of the Swire Group, recorded a net loss of HK$541 million last year, a major setback compared to a profit of HK$975 million in 2016.

HAECO said the loss included an impairment charge of HK$625 million relating to the goodwill attributable to its unit, HAECO USA Holdings, Inc, and a write off of HK$249 million relating to the latter's net deferred tax assets.

Directors have declared a second interim dividend of 50 HK cents per share for the year ended last December. Together with the first interim dividend of 53 HK cents per share paid last September, total dividends for the year amounted to HK$1.03 per share and represents a total distribution of HK$171 million.

Total revenue last year rose 5.7 percent to HK$14.5 billion of which the Hong Kong segment increased 4.1 percent to HK$4.04 billion, while revenue from its operations in Xiamen on the mainland jumped 11.7 percent to HK$7.2 billion. However, revenue by HAECO Americas fell 7.4 percent to HK$2.6 billion as it generated fewer airframe services work and reconfiguration services.

The group predicted the demand for airframe services will improve in the American segment as more work is expected from a major customer. Results from its US unit will improve because of the enhancement in efficiency and work flow.

"The relocation proposed by the Xiamen municipal government of the Gaoqi airport to a new airport in the Xiang'an district remains subject to central government approval. Management maintains regular communications with the local authorities about the new airport and its opening, which will be material to the operations of the HAECO Group in Xiamen," HAECO chairman John Slosar said. In Hong Kong, the group plans to hire 300 employees for aircraft modification services.

Meanwhile, another member of the Swire Group, Cathay Pacific (0293), is expected to report a full-year net loss of HK$2.7 billion for 2017, according to the median estimate in a Bloomberg News survey of five analysts.

While its cargo business and passenger traffic, especially premium travelers, are recovering, inflated wage costs and ever increasing competition from Chinese rivals are issues that it has to contend with. Among challenges, fuel hedging bets gone awry top the list. Losses from miscalculated oil price bets are probably over double the airline's net loss for 2017.

Cathay's fuel hedging losses reached HK$6.45 billion in 2017, according to the median of four estimates in the survey.

Cathay could reverse course to book a gain in 2019, after it shortened the contract period to two years from four, said Corrine Png, CEO of Crucial Perspective Pte in Singapore.

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