Leading Asian crane and equipment rental and distribution company, Tat Hong Holdings, has reported a three percent decline in turnover for the quarter which ended on the 31 December 2016 compared to the same quarter a year earlier. It is attributing this decline in gross profit margin primarily to: lower margins from the Crane Rental Division arising from lower utilisation rates in Singapore and Australia; and additional costs incurred by the Tower Crane Rental Division in order to complete projects on schedule.
Specifically, the Crane Rental Division’s revenue declined by 35 percent (to S$30.3 million for the quarter) due to continued weak demand and pricing pressures in its main markets of Singapore and Australia. The closure of a specialised transport unit in Australia in April 2016 further contributed to the revenue decline. Revenue contribution from the group’s other main markets in Malaysia, Hong Kong and Thailand, however, remained comparable to the previous corresponding quarter.
Other than the additional costs incurred, the group reports that its Tower Crane Rental Division continued to perform well and posted a revenue increase of 14 percent (to S$27.4 million) for the quarter. The division also continued to record high utilisation rates (in excess of 80 percent) from the deployment of its tower cranes to new projects in the infrastructure, power generation, transportation and commercial building sectors.
Commenting on the group’s performance for the quarter, Roland Ng San Tiong, Tat Hong’s managing director and group CEO, said: “It is heartening to note that the majority of our businesses posted top line growth in the third quarter. Our tower crane rental business continued to perform well and has secured a good pipeline of potential projects for the future as infrastructural development in China continues unabated. However, weak demand for crane rental services, particularly in Australia and Singapore, posed a drag on the group’s performance, resulting in a marginal three percent decline in revenue to S$121.5 million.”
Looking forward, the company believes that market weakness and competitive pricing pressures in the ASEAN countries and in Australia will continue to impact the Crane Rental Division. As a result, efforts to reduce operating costs through fleet rationalisation will continue. It also expects the Tower Crane Rental Division in the People’s Republic of China to perform well on the back of a strong pipeline of committed projects in the building, infrastructure, transport and power generation sectors.