The Straits Times / The Business Times News on Hyflux

Staff costs rise as Hyflux expands

WATER treatment firm Hyflux blamed its performance slide on lower sales in Singapore and higher staff costs.

In the third quarter, its net gain slid 86 per cent to $1.9 million. Moves to expand into new markets and the oil recycling business added to staff numbers and sent related expenses up 23 per cent to $5.6 million.

Another factor that hit the bottom line was the elimination of engineering, procurement and construction revenue from projects of Hyflux's unit SinoSpring Utility since July. This was the result of Hyflux raising its stake in SinoSpring to 80 per cent from 50 per cent.

Hyflux previously billed SinoSpring for water projects and recognised it as revenue, but can no longer do so as it has become an 80 per cent Hyflux subsidiary.

For the first nine months ended Sept 30, Hyflux's profit fell 60.3 per cent to $14.5 million.

But analysts believe the company's 25-year concession to build and operate a seawater desalination plant in Algeria should provide good future earnings.

'The project will probably commence in mid-2007 and revenue recognition is likely to be in 2008 and 2009. We estimate it would amount to an additional $20 million in earnings in those years,' said UBS Investment Research Jaj Singh in a note last month.

UBS upgraded Hyflux to 'neutral', with a target price of $2.70.

Hyflux closed up five cents at $2.30 yesterday.