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SATS share price up 1.88% after it takes ownership of frozen meat supplier

After the acquisition, SBRF will become a wholly-owned subsidiary of SATS Food Services, and will be renamed to Country Foods.

Ground handling and in-flight catering service provider SATS Ltd has bought up the remaining 49% shareholding stake in its joint-venture firm SATS BRF (SBRF) Food for S$17 million. The announcement which was made on Thursday evening, contributed to the firm’s 1.88% rise in share price the next trading day.

SBRF is co-owned by SATS and Brazilian food company BRF GmbH. After the acquisition, SBRF will become a wholly-owned subsidiary of SATS Food Services, and will be renamed to Country Foods.

The buyout follows SATS’ vision to feed and connect Asia, the firm said, as the company aim to consolidate its leadership position in aviation catering in Asia and become a leading central kitchen supplier to the food service industry in China and India.

‘The foundation for this strategy is a digital integrated supply chain that centralizes procurement and distribution to improve food safety, quality, and production efficiency,’ SATS said in its media release.

‘By taking 100% ownership of our food distribution joint-venture company we can accelerate end-to-end traceability of raw materials for our customers, and deploy data analytics to achieve greater efficiency and quality, while reducing food waste,’ explained Alex Hungate, president and chief executive officer of SATS.

Shares of SATS rose 1.88% or S$0.09, to S$4.88 on Friday morning 10.30am Singapore time, which was the open trading session following the announcement.

The new entity, Country Foods, has also signed an exclusive distribution and licensing agreement with BRF Global GmbH – a subsidiary of BRF - to distribute products and the right to license brands owned by BRF’s parent organization BRF SA, in Singapore.

In July, SATS’ share price sank more than 6% after it posted a 14.4% decline in first quarter profits. The profit fall was attributed to ‘macro headwinds’. Net profit for the first quarter was at S$54.7 million, a S$9.2 million decline compared to a year ago.

In its earlier earnings results statement, SATS pointed out the signs of weakness in the global economy, as reflected in the softening of air cargo volume. Aviation passenger volumes in Asia continue to grow although more slowly, while rapid urbanization in the region is still driving demand for safe, high-quality food.’

The group plans to strengthen its market leadership by continuing to extend its network across Asia-Pacific and digitalizing its operations to enhance service and improve productivity.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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