SAHCO H1 profit falls 41% despite revenue growth, rising...

Skyway Aviation Handling Company (SAHCO) Plc reported a 41.49 per cent decline in pre-tax profit for the first half of 2026 despite recording higher revenue, as escalating operating and administrative costs eroded margins and weakened earnings.

The company’s unaudited financial statements showed that pre-tax profit fell to N5.83 billion for the six months ended June 30, 2026, from N9.96 billion recorded in the corresponding period of 2025.

Profit after tax also dropped by 52.73 per cent to N3.85 billion, while earnings per share declined to 284 kobo from 601 kobo a year earlier.

Revenue, however, increased by 9.25 per cent to N23.01 billion from N21.06 billion, driven largely by stronger import cargo handling activities.

Import cargo handling revenue rose by 44.19 per cent to N5.54 billion, accounting for 24.07 per cent of total revenue, while passenger handling and related services remained the company’s largest revenue source, contributing 71.50 per cent after recording a modest 2.38 per cent increase to N16.45 billion.

Export cargo handling revenue declined by 11.37 per cent to N1.02 billion, representing 4.43 per cent of total revenue.

The revenue growth was outweighed by a sharp increase in direct operating costs, which surged 63.07 per cent to N10.75 billion, causing the direct cost-to-revenue ratio to rise to 46.73 per cent from 31.31 per cent in the corresponding period of 2025.

Consequently, gross profit declined 15.28 per cent to N12.26 billion, while the gross profit margin narrowed to 53.27 per cent from 68.69 per cent.

Equipment repairs, direct labour and equipment running costs were the principal drivers of higher operating expenses. Equipment repair costs more than doubled to N2.37 billion, direct labour expenses rose 53.90 per cent to N2.58 billion, while equipment running costs increased by 202.94 per cent to N1.10 billion.

Administrative expenses also rose significantly, increasing 41.25 per cent to N6.58 billion, resulting in a 39.91 per cent decline in operating profit to N6.02 billion and compressing the operating margin to 26.18 per cent from 47.60 per cent recorded in the corresponding period last year.

The pressure on profitability intensified during the second quarter, when revenue increased by 6.08 per cent, but direct costs climbed 65.57 per cent, reducing quarterly pre-tax profit by 50.54 per cent to N1.93 billion.

Finance income improved to N133.91 million from N65.94 million, but finance costs rose more sharply to N331.11 million, resulting in net finance expenses of N197.21 million, almost three times the previous year’s level.

The effective tax rate also increased to 34.01 per cent from 18.30 per cent, contributing to the steeper decline in net profit.

Despite weaker earnings, SAHCO’s balance sheet strengthened considerably, with total assets expanding 63.40 per cent to N86.55 billion, largely driven by investments in property, plant and equipment, which rose to N53.78 billion and accounted for more than 62 per cent of total assets.

However, liquidity weakened as current assets declined 9.77 per cent to N26.02 billion, while current liabilities increased 64.14 per cent to N14.81 billion, reducing the current ratio to 1.76 times from 3.20 times and shrinking working capital to N11.21 billion from N19.82 billion.

Cash and cash equivalents fell to N3.86 billion, while trade receivables remained high at N20.11 billion, accounting for more than three-quarters of current assets.

Although total borrowings declined 26.01 per cent to N3.25 billion, the company shifted towards shorter-term debt, with short-term borrowings doubling year-on-year to N1.40 billion.

The company maintained a net cash position of N608.86 million, but returns remained subdued, with return on average assets at 4.54 per cent, return on equity at 6.07 per cent, and asset turnover at 0.27 times, indicating that the enlarged asset base has yet to translate into stronger profitability.

SAHCO’s shares closed July unchanged at N171.20, preserving a year-to-date gain of 93.56 per cent, suggesting investors maintained confidence in the company’s long-term prospects despite weaker half-year earnings.