Saudi Airlines Catering Q1 profit slides as Covid-19 halts flights
Net profit falls to 15.6m riyals compared with 103.5m riyals in the same quarter last year
Saudi Airlines Catering Company posted an 85 per cent plunge in first quarter profit, mainly because of a disruption in business as the government suspended flights in and out of the kingdom to contain the spread of the coronavirus.
Net income for the first three months of the year ending March 31 fell to 15.6 million Saudi riyals (Dh15.3m), compared with 103.5m riyals in the same quarter last year, the company said in a filing to the Saudi Arabian stock exchange, Tadawul, on Wednesday. First quarter revenue declined 13.2 per cent to 452.7m riyals.
"The main reason for the decrease in net profit was the disruption of the business activities," the company said. "Substantially, the suspension of the commercial flights due [to] the implementation of the precautionary measures by the government, in order to overcome the outbreak of the Covid-19, which resulted in lower sales."
The accounts receivable provision increased by 15.3m riyals while fixed costs remained the same, it said.
Saudi Arabia halted all international flights into and out of the kingdom in March and suspended the Umrah pilgrimage as a precautionary measure to curb the spread of the coronavirus. Global airlines have slashed capacity and cut jobs in efforts to preserve cash as the virus dipped air travel demand. While some countries are easing lockdown measures, airline passenger traffic is unlikely to return to pre-crisis levels until 2023, according to the International Air Transport Association.
Saudi Airlines Catering's bottom line results missed the analyst estimates of EFG Hermes by 85 per cent due to a combination of "lower-than-expected" revenue and margins, it said in a note on May 20.
"While we were anticipating a weak set of results, the extent of the revenue and margin pressure is somewhat surprising, given that Covid-19 flight restrictions only started in the last two-to-three weeks of the quarter," EFG Hermes said. It has a neutral rating on the stock.
The company provides catering services in-flight and for airport lounges, retail, private sector companies and government offices.
In March, the company said it will postpone fourth-quarter dividend distribution to shareholders until further notice and after "current conditions are settled" as a "precautionary measure" to preserve liquidity.
The company provides ground handling services such as baggage handling, cargo loading and offloading, fleet services and traffic control services at 27 airports in Saudi Arabia, according to its website.
Saudi Arabia has recorded 59,854 coronavirus cases with a death toll of 329 as of Wednesday, according to Johns Hopkins University, which tracks the spread of the virus globally. There have been 31,634 recoveries as well.
Globally, 4.9 million cases have been recorded while the number of deaths is at 323,413 with 1.69 million recoveries.
Updated: May 20, 2020 03:28 PM