Welcome to SATS Q3 FY2021/22 business update. Before we begin, SATS would like to remind you that certain comments made during this call may contain forward-looking statements. Many of these forward-looking statements can be identified by the use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan, and similar words and phrases. The company's actual results and future financial condition may differ materially from those expressed in any such forward-looking statement as a result of many factors that may be outside the company's control, including, but not limited to, changes in the business environment. The company does not undertake any obligation to update its forward-looking statements. I will now hand over the call to Carolyn Khew of SATS. Please go ahead, Carolyn.
Hi. Good evening, everyone. Welcome to another SATS webinar. Just a while ago, we released our results for the Q3 and the nine months for FY2021/22. With me in this room to take you through the results are Kerry Mok, President and CEO, Manfred Seah, CFO. We have also with us today, Jacob Piccoli, CEO of Gateway Services, and Spencer Low, who is our Chief Sustainability Officer. Okay, I'll hand the floor over to Kerry, who will take us through the results.
Hi, good evening, everyone. This is my first analyst call with everyone, so let me just quickly run through the business update. Can you go to the next slide, please? Okay, let me just start with Q-on-Q operating stats. As you can see from the slide, a lot of positive momentum across the board. Operations obviously have improved quarter-on-quarter against previous year as well. Flight passenger volume obviously has increased mainly due to VTLs and year-end holiday. In particular, flight increased to 30K in Q3. Passenger handle to 3.6 million. This all mirrors the IATA trends in terms of revenue passenger kilometer that grew almost 80% year-on-year in December.
In Changi Airport alone, , we had a huge growth in our PAX, in fact, almost more than 800,000 PAX being managed in December itself, and about 12,000 commercial flights handled in December itself. That is a huge increase compared to December 2020. Non-travel sector continued steady growth, driven by institutional catering. Meals increased to 13 million in Q3. Cargo, which obviously has been a star performer for us, continues its robust growth. It's increased to 459,000 tons in Q3 due to strong demand for goods and obviously flight capacity as well. This mirrors IATA industry trends, where it's like grown from almost 9% of pre-COVID level in December 2019. Employee figures held steady.
Recruitment will be ramped up in the coming quarters, and I'll explain that a little bit later. Moving on to the next slide, which dives a little bit into the cargo slide. Cargo continues to grow in tandem with our international air cargo growth. CTK in December grew 9% from December 2019 pre-COVID levels, and volumes in 2021 overall grew more than 19% year-on-year. This again mirrors the Changi stats of about 24%-25% from December 2020. Key e-commerce events such as 11.11 and pre-Christmas has helped in the cargo capacity as flights increase as well. For us, cargo is a key business driver. It's also helped us in our cargo associates.
Overall, cargo revenue growth was 17% Q3, and cargo continues to drive year-on-year growth of 26% and 4.1% quarter-on-quarter. If I move on to the next slide. We have been scaling up our innovation capabilities while developing local ventures for non-travel business. In particular, we have been investing in digitalization of our cargo and security command center. This is a very digitally connected center that enables us and our customer to share real-time decision-making by having data sharing amongst different parties. This has actually helped to increase our capability in this digitalization of our business model. In terms of non-travel business, we have obviously grown 6.8% year-on-year to SGD 133 million.
We have started new ventures as well on the food side, in particular, FoodFlik and Twyst. Here you can see a couple of pictures in there of what we've done. It's our first actually retail outlet in Raffles Place. Moving on to the next slide. We have also expanded our food solutions and gateway services internationally. In particular, in India, we have started construction of our first central kitchen to support the growing customer base. It is expected to be operational in 2023. We will be putting high-end technology such as automated rice line, including IoT as well for food monitoring.
It also includes an innovation center that will link up with the innovation center here in Singapore as well as U.K. to offer SATS product and packaging expertise for the Indian market. This central kitchen will be critical for us to drive growth for India going forward, and that will serve both aviation and non-aviation customer. Another item that I'm pleased to announce, and we just announced that as well, we have increased our stake in AAT by another 16.4%, making it a subsidiary for us going forward. This is again part of our strategic move to actually do more cross-border e-commerce logistics in the Greater Bay Area for China. Obviously, Hong Kong is a very key cargo hub globally, and it's very important that we increase our presence in Hong Kong to drive that connectivity.
If I go on to the next slide. Our business activities and growth strategies are really underpinned by strong corporate governance that allows to build sustainable growth. Here you see we have recently won quite a few awards, across the different, categories, and this really reflects the strong credentials and our commitment to international standards, that SATS aspires to as well. With that, I will hand over to Manfred, who will give you the lowdown on all our financials. Thank you, Manfred.
Thank you, Kerry. You've done all the interesting bit. I'm gonna take you through a few slides. I won't go through all, just to leave a bit more time for Q&A. SATS 3Q revenue improved 22.6% to SGD 307.8 million, backed by aviation recovery. Travel and non-travel revenue grew 40% and 6.8% respectively. The group recorded PATMI of SGD 5.1 million, making this the fourth consecutive quarter of positive results for SATS, since the pandemic outbreak. For the Q4 , we have recognized total relief of SGD 38.1 million, without which SATS 3Q PATMI would have been a loss of SGD 33 million. Share of earnings from associates and joint venture increased SGD 8.6 million to SGD 12.1 million.
This is contributed mainly by our cargo associates in the region. SATS 3Q EBITDA came in at positive SGD 331.7 million, and our EPS for the quarter improved by about 0.7 cents to 0.5 cents per share. Moving to slide 11. As mentioned earlier, while revenue improved 22.6%, OpEx actually outpaced that by 28.2%. Staff costs were SGD 43.4 million, up by SGD 43.4 million, primarily due to lower government reliefs, higher contract services in tandem with the resumption of business activities and implementation of additional safety measures at Changi Airport. SATS recorded EBIT loss of SGD 9.5 million this quarter, reflecting a decrease of about SGD 13 million compared to 3Q last year.
This was mainly contributed by bad debt or doubtful debt provision that we have taken for our cruise operations due to the Genting Cruise Lines outstanding amount. Share of earnings from associates improved by SGD 8.6 million to SGD 12.1 million, as we see recovery in the performances of all our associates, especially those in the cargo business. For the next slide, I shall leave it to you to read. This is actually the nine months year-on-year comparison. Moving on to the quarterly trend in slide 13. This sets out SATS key financials for over seven quarters, starting from first Q FY 2021. As you can see from the trend, it's all self-explanatory.
Revenue at the share of associates, PATMI all improved sequentially over the 7 quarters. I wanna draw your attention to the core PATMI, the ex-relief, excluding relief. We started the period with a loss of about SGD 107 million that has now narrowed down to about SGD 33 million. This is excluding relief. Before I leave this slide, if you look at the EBITDA, this is the Q6 of positive EBITDA. Cash flow-wise, we are fine. Yeah. Now, for the next 2 slides on segmental revenue for the 3Q and 9Q, maybe I'll just cover the 3Q. For the 9 months, I'm gonna leave it to you to read.
Just to orientate you to this slide, Food versus Gateway grew by about 16% and 33.5%, respectively. This is year-on-year growth. Travel, as you can see, grew by about 14%, and non-travel came in at about 6.8% growth. Singapore continued to be the chief contributor of our business, and Singapore actually grew by 20.7%. Very quickly, going into the OpEx slide number 16. Group OpEx increased by about 28.2%.
These are led by higher staff costs, primarily due to lower grant support for quarter, and increased business volume and activities, and also implementation of additional safety measures. Cost of materials, premises, other costs all rose in tandem with volume growth. Of course, the other operating expenses included an outstanding amount from GCL, Genting Cruise Lines of about SGD 10.7 million. Now we have taken full provision of the situation unfortunately with the news of the company going into liquidation. We will exert all initiatives to recover as much as we can. At this point in time, we are exercising cash handling for all the activities that we provide services for.
Next two slides and these are more for segmentation. I'm gonna leave you to read. I wanna jump into the balance sheet in slide 19. Just hit on the key points here. Total assets and total equity actually stood at about SGD 3 billion and SGD 1.7 billion respectively. Cash wise, we are okay. We are still at a cash level of about SGD 678 million, but excluding the total borrowing of about SGD 540 million. SATS is still in a net cash position of SGD 135 million. Return on equity for the quarter returned to positive territory of about 1.2%, as the group reported profit for the period. Okay. Last slide. Yeah, last slide is on cash flow, slide 21.
As mentioned earlier, SATS cash position actually is still at about SGD 678 million. This declined by about SGD 200 million, primarily due to a repayment of SGD 150 million term loan. Free cash flow for the 9 months is at a negative of about SGD 49 million, this primarily due to a higher prepaid tax spent for the period. I think that concludes my financial presentation. I'm gonna hand this back to Kerry. Oh, sorry. For Q&A. Yeah. Thank you. Sorry. Yeah. You're gonna answer-
Yeah, sure. We can start. Yeah. We move now over to Q&A.
We will now begin the Q&A session. Audio participants with questions to pose, please press zero one on your telephone keypad, and you will be placed in the queue. To cancel the queue, please press zero two. Once again, zero one on your telephone keypad now. We have got Chua Kuan Ping from OCBC. Please go ahead.
I have two questions. One regarding the government relief. I think last time during the briefing, it was mentioned that the government relief will be given spread over financial year 2022. Does that mean that next quarter, FY 2022, that will be the last quarter that we will see the government relief?
All right. Chua Kuan Ping, you want to ask the other question first?
The other question is on the cost pressure. Given the rising inflation, can you please share how SATS are doing to mitigate cost pressure, and how easy is it to pass on the higher costs to the consumers, the customers? Thank you.
Thank you for your questions. Chu Peng, I'm gonna take these two questions. These are easy ones. I'm gonna leave the difficult one to Kerry afterwards. Government relief. Now, we have. , the government's been very generous and helpful, supportive to the aviation sector. Altogether there have been nine tranches, right? The last is eight and nine tranches that was announced sometime in September. Now the out of the nine tranches, right, for each tranche, there's a declining. It kind of tapers off. The intention here is really for these Job Support Scheme to support employment, if you like. Help the company to preserve employment, particularly for the local and residents of Singapore. Now, we have benefited from that.
This actually helps us to maintain capabilities over the entire period of the pandemic. But having said that, the relief, , quite rightly, , as volume comes back, business volume comes back, the relief will taper off. The reason for the Q3 staff cost increase was partly because of lower relief compared to a year ago. Yeah. That's the first, the answer to your first question. The second question, good question. Cost pressure, I think, , with the rise in interest rates, I think the market is calling for about 75-150 basis points increase over the period, and that will indeed put a tremendous inflationary pressure on all businesses.
That would actually increase business costs for everybody. Now, in our situation, particularly the aviation sector, it's not so easy to actually pass costs down because, , the entire ecosystem has suffered over the last 24, 25 months. Surely, , we will look at ways to be able to do that. , we will have to work collaboratively with all the stakeholders at Changi, number one. Number two, engage our customers to look at justified way of passing the cost. I think the other way of looking at cost savings or rationalization is to look at what other services we can provide them.
We have been doing that over the last 15, 18 months to be able to engage our customers to see what other services that can be shared. Henceforth, the board stakeholders can actually look at a win-win situation to reduce costs accordingly. That's not gonna be easy. I hope I've answered your questions.
Oh, okay. Yeah. Thank you.
Thank you, Chua Kuan Ping .
Thank you. Our next question is Mr. Louis Chua from Credit Suisse. Please go ahead.
Hi. Good evening. Got quite a few questions. You want me to ask them one by one or all together?
Why don't you download all the questions at one go, so we can answer them together?
I think the first is, , if I look at the operating statistics, big jump in flights handled, passengers handled, , on a quarter-on-quarter basis, you're talking about a multifold increase. If I look at it in terms of your revenues, be it your gateway revenues or travel revenues, and the increase is much more modest. You are looking at, I think overall it's about, based on my rough gauge, is like maybe around 10% plus or minus increase on a quarter-on-quarter basis. Just wanted to figure, , what's causing this parity. That's the first question. The second question, I think Kerry talked about it briefly in the opening remarks.
If we were to look at the number of employees, the head count, I think there's been a slight uptick from a quarter-on-quarter basis as well. In consideration of the expected opening up of the Singapore aviation market, how should we be thinking about the head count, , for the rest of this calendar year? , because of the tight labor market, , what sort of relative increase in terms of the salaries will you have to give to bring these people back? That's the second question. The third question, I think just to refine the government reliefs point a bit further, I think there's some mention of additional support being given during the Singapore Budget.
If you can share further color on that one. Lastly, sorry for hogging the airtime, but just to confirm the Genting so-called provision, that's SGD 10.7 million. That's the entire sum, right? That's all.
Okay. I think I can take most of these questions and then, , if my colleagues here, Jacob. Actually, we are privileged to have Jacob here, joining us. Kerry can add in, right. Operating statistics actually showed, , quite a high volume growth, but flights and travel revenue didn't grow in tandem. Actually, Louis, , Gateway actually grew, , on a Q-on-Q basis, right? Gateway grew. Let me just get my figures correct. About 16%.
SGD 10 million.
Year-on-year. Gateway grew 34%, and then food actually 16%. That's kind of expected because, , while there are flights that's being loaded on, these flights are not full, right? From a pax load standpoint and, the food is a function, the meals that we serve is a function of the number of passengers that's on board. But the flights have increased tremendously. I think the gateway revenue has followed suit, yeah. Now the second question that you have on headcount, tight labor market, maybe I can get Kerry to-
Yeah.
To chip in later. Let me deal with the relief question, your fourth question first. Actually, quite frankly, the budget didn't give us much, , relief in terms of job support, yeah. Those conditional support, and we have. We tried to quantify it, and it doesn't amount to very much. It would not be material. But having said that, please, I think , I think the government has kind of expressed, , way back that, , once the business volume comes back, they will taper this off. And then they will be looking at very targeted type of support. As of now, since we have not been informed of such a specific one.
I would not expect too much at this point in time. Now, in so far as the GCL provision, that's taken in full. Yeah. SATS-Creuers has taken the GCL provision in full, but of course there are other debts that are still good. There's no need to take further provision. Maybe Kerry can chip in on the head count side.
Louis, just on the head count side, clearly we are all going after the same pool, , attrition in the past, we have also suffered attrition, but attrition is not as high as again the other general industry. We have been able to manage that very well. In terms of what I wanted to say was it's gonna start up, right? You can hear the announcement from Ministry of Transport and everything. VTL is gonna increase. You'll see that other countries are also gonna open up as well, particularly in Southeast Asia, and of course in Europe and the U.S. they're gonna open up as well. We are gonna gear up for that growth.
Again, Changi being a hub, we're gonna step up our increase in head count over the next few quarters in support of the anticipated growth. What this means is likely we will have to scale ahead because we have to bring people back for training. It may not be in tandem with the revenue growth that you see the numbers coming through. I just want to be upfront that, , there will be additional. We expect to have that mismatch over the next few months because we are scaling up for that growth. In terms of whether, , the wage inflation is gonna hit us, it's not just the hiring of the folks.
If you read the papers as well, everyone's expecting an increase in salary growth as well. We will have to be in line with the market to ensure that our existing staff talent is also maintained. We expect a kind of cost pressure across the board. The good news is from a hiring standpoint, we do have workers that have worked with us in the past before, and these are foreign laborers that have previously worked with us. We have reached out to them and a lot of them have indicated that they're willing to come back to support the growth. One of the key thing that will give us access to the pool of resources actually when the border opens up between Singapore and Malaysia.
We've also worked very closely with MOM and all that to get access to non-traditional sources, , even places like Myanmar and all that, some of the workers that we are gonna bring in to help us manage our head count growth as required. Yeah. Yes. The cost will go up, but we are managing it based on skilled resources that we have, but at the same time also marrying it up with additional. Because we have done some cross-training over the last few years, so we are able to mitigate the increase, not so much in terms of just a straight line increase, but based on some of the cross-training we can mitigate some of the head count increase. Yeah.
Thank you. The Q&A session is still open. If you would like to ask a question, please press zero one on your telephone keypad now. We have a question from Ryan Davis, Citigroup. Please go ahead.
Hi, I'm Ryan from Citi. I'm just wondering, what's the valuation that you're paying for AAT?
Have a question from Ryan Davis, Citigroup. Please go ahead.
Sorry, Ryan, we can't hear you. Can you repeat?
Hi. I'm Ryan from Citi. Can you hear me?
Yeah, you're a bit muffled, Ryan, unfortunately. Can you speak closer to the-
Yeah. I'm wondering what is the valuation that you're paying for AAT?
Valuation for AAT?
Yeah.
Actually, we have disclosed that, right? Yeah. It is disclosed, right?
All right.
It was actually in the announcement that we have sent out. Yeah.
Yeah. Yeah, we saw that.
All right. Thanks. Hello, Ryan.
Oh, hi. Yeah, yeah. I've seen the news.
Okay. Actually I was just checking to see whether we indeed have announced it. Yes, we did. , for the incremental 16%, it's equivalent to about SGD 58.5 million.
Mm-hmm.
You can actually work out, , for 100% what is that. Yeah. In Hong Kong dollars, I believe is about HKD 340 million. Mm-hmm. Do you get that, Ryan?
Yeah, yeah.
All right. Thank you.
Thank you. We've got Neel Sinha from CLSA Singapore. Please go ahead.
Hi. Good evening. Thanks for the presentation. I had a couple of quick questions. The first is to do with this. This is something that I'm seeing across the board with a few other companies as well. Utilities expenses, what are your views on it, and how should we think about it? Will it remain at the level that we've seen through Q3, given where oil prices-
Sorry. Sorry, Neil, what expenses are you talking about? Fuel?
Uh-
Fuel.
Utilities.
Sorry?
Ut-utilities.
Utilities. Okay. All right.
Yes.
What's your second question, Ryan?
Yep. For utilities.
Oh.
I'm wondering what your thinking is over this coming year, in terms of where we should also think about modeling. The second question is, actually, it'd be great to get a little bit of an update on JAS, CAS and the Malaysia joint venture.
Okay. Neel, Manfred here. Very simply put, we, , CAS, we are not a big consumer of fuel, right? We look at fuel, , although the rates or prices have gone up quite significantly, , it only represent less than 1% of our revenue, yeah. So that's for the fuel. For utility, yeah, , yes, it's a little bit more, but it's no more than 3%. So if you put it all together, it's not a significant portion of our operating costs. But year-on-year, quarter-on-quarter, yes, it has increased quite significantly actually.
Yeah. Manfred, how should I think about 2022? I mean, either financially or calendar year. Should I just assume it'll be sort of similar proportion? I mean, you don't break it out specifically, but
We don't. Because it's so insignificant, if you look at our OpEx slide, it is actually embedded in the other operating expenses. I've already explained the increase of the other operating expenses was primarily due to a bad debt that we have taken, right? There's professional fees in there. There's fuel costs in there, but the fuel cost is not a big one. I already given you indication that it's less than 1%-2%, right?
Okay. All right. Thank you.
Your for 2022, , this is not gonna deviate too far from that, because a big part of the energy cost is that the utility cost is actually fixed cost.
Okay. Thank you.
Okay.
And, um-
Now just to give you some color on the Malaysia, Indonesia, I think, PT Cardig, PT JAS business. The core business is actually cargo related. , the JAS business has improved significantly, continued to be robust. And basically, you should see JAS and CAS as one cash operating unit, a cash generating unit. , a big part of CAS is actually JAS, yeah, right?
Yeah.
Now, Malaysia, our joint venture with AirAsia is the volume. One of the observation that Luis has done earlier, flights has increased quite significantly. It was also because of the Movement Control Order being lifted, Malaysian borders being open. AirAsia has put on a lot of flights as a result of that. Then GTR's business is actually totally related and connected to AirAsia volume.
Okay. Thanks very much for that, Manfred. Quick follow-up. Okay. The Malaysia business side I think is probably easier to comprehend in terms of how they're opening up. For CAS, like, how should I think about when the cargo business has had a big bump up, obviously despite all the restrictions, during the COVID environment for people just having to rely on more logistics. Should I think about the cargo business continuing to grow at like a 10%-15% kind of clip or I mean, how are you all viewing it? Then of course there's a bit of the catering as well there, right?
Maybe I'll give my perspective and then I will ask my colleagues here whether, , they'd like to add on, right? Cargo has indeed been, , consistently been the bright spot for our business. , cargo in some ways, volume-wise, has come back to pre-COVID volume, right?
Mm.
Consistently, not just in Singapore, but also in the region. , one of the reason why our share of associates have gone up this quarter is also because of the cargo business throughout the region have basically reported better results, right? Now I think the cargo business pre-COVID may not be a good gauge anymore because of the entire pandemic, , the e-commerce side of things, , we believe the cargo business continue to be promising. Which actually, , is part and parcel of our strategy to go into the region to continue to consolidate and also deepen, right, and expand and deepen our network. That is where we are today.
I don't know whether Yakup or Kerry.
No, just to add on the cargo side. I think even at the Capital Markets Day, we stated that cargo is a key focus strategy for us. In particular, the whole e-commerce supporting the e-commerce goal as well as temperature control cargo is something that we are very committed to continue to grow that. We believe the cargo will continue to be a bright spot for us going forward.
All right. Thank you, gentlemen. Thanks very much.
Thank you. We have a follow-up question from Louis Chua from Credit Suisse. Please go ahead.
Hey, sorry. It's me again. Just two very quick follow-up questions. Firstly, any target headcount for by the end of the year? And secondly, I think, Manfred, just now I was asking more from a quarter-on-quarter perspective. , in terms of your flights doubling quarter-on-quarter, number of passengers up four times. If you look at the travel revenues and gateway revenues on a quarter-on-quarter basis, I think the increase was really more in the 10% range.
Okay. Louis, you're very sharp. You wanna ask quarter-on-quarter return. Okay. There was an adjustment that we actually did pertaining to some rebates. If you like, without that adjustment, obviously, , our reported revenue would have been higher. That adjustment amounted to less than SGD 10 million. That will basically explain the Q&Q adjustments. Is that okay?
Yes. Thanks, Manfred. One more or-
Sorry, Louis, just to add, that revenue adjustment has got no impact to the bottom line. It is more of, , regulatory type of fees that we have adjusted out.
Okay. Sure. Thank you. The headcount?
Yeah. No, for the headcount, we don't have a well, specific targeted headcount. What we are trying to do is to look at core areas where we need to increase some resiliency in terms of headcount. As you all know, , one of the things that we are managing through as well is the Omicron challenge as well. There are specific areas that we're gonna buff up the headcount just to be more resilient. And we don't really have a targeted headcount to shoot for, but it's really in conjunction with what we see is the volume growth that will come.
That's something that we work closely with the Changi Airport ecosystem to understand how that growth is coming back and then specifically which area we're gonna increase to support that growth. That's how we are looking at it. Of course, the situation remains fluid as to where and when those numbers are gonna come.
Louis, just to add to what Carey has said, , operationally we are in the business of safety, security. So, , quite frankly, we cannot risk incidents or delays and things like that. So safe to assume that, , there will be some uptick where we really need to prepare ahead of the volume surge or volume recovery, which we expect, , to come about later part of the year. It's not easy also because, , as we recruit, there are also leavers, right?
Therefore, , we are stepping up all initiative and to bring back, right, people that have left us, , some time back, because of pandemic during the rightsizing or during the border lockdown. We are hoping to actually bring back some of these capabilities in preparation for the recovery of the aviation.
Mm-hmm. Yeah.
I don't know whether Yakup you wanna add anything?
No.
Yeah. Thank you.
Thank you.
Okay. Thanks a lot, Kerry and Manfred.
Thank you.
Okay. I think we can take offline questions. There is a question for Yakup from Chuanyao. With Genting Cruise now down, will we be seeing ship volumes drop by half going forward? Are there plans to have the new ship take its place?
Yeah. Thank you. I think the demand for cruise remains strong in both Royal Caribbean and Star Cruises are still sailing. That will likely to continue. There is no announcement to indicate that there would be a change. So long as the demand continues at the current level, we don't see any major change because if there is a drop in sailing schedule by one, it's very likely that others will also fill up the gap.
Mm.
Yeah. Thank you.
Thank you. The question and answer session is still open if you'd like to ask a question. We have got Chua Kuan Ping with a follow-up question from OCBC. Go ahead, please.
Yeah. Hi. Maybe just a follow-up question on the cost side. Have you started your price adjustments in view of the inflation, or you are waiting for your competitors what they are doing?
Let me take that question. Look, , we obviously have contracts in place with our existing customers and all that, and there's a cycle for some of these contracts. On the food side, we do have meal presentation and that we actually present. That actually based on what is being selected, there's an opportunity to reflect the existing prices that we see, right, in our food costs going forward. That's one way that we are working with the customer. Of course it's within the customer's right to choose the kind of specs that they want, because it's really driven by the specs of the food they're representing.
On the rest of it, the other parts of the business, like I said, is based on contracts. As part of contract review and all that, all those will be in discussion with our customers to discuss some of these inflationary pressures that everyone is facing. That's how we are taking it. Of course, , I think Manfred alluded earlier, the aviation obviously is in a bit of challenge. How we commercially negotiate and all that is gonna be on a case by case basis with different customers.
Okay. How about the raw material side for your food business? Have you seen an update in the raw material price or still, , you are having a contract with them, so they can't really increase the price?
Sorry. Ground? I couldn't-
Your raw material price-
Raw material.
There's actually an increase, but these are in tandem with volume increase, right? Yeah.
Okay.
To me, I add, if we do in terms of the meal side, , it's dependent on the specs, which is raw materials. Sometimes we use substitute raw materials instead of using, , a type of protein, we substitute a different protein, the price is adjusted for. There are various ways that we can actually mitigate some of the price increase by looking at substitute proteins and all that. This is something we work closely with our customers to help them mitigate the price increase, at the same time mitigate our cost increase as well.
Okay. Thank you.
Thank you. We have got a question from Terence from Phillip Securities Research. Please go ahead.
Hello. Can you all hear me?
Yep.
Yeah. Thanks so much. I know this question is a little bit premature, but given that we are on this recovery track, I'm just wondering at what point will management feel confident or what metrics must you see for management to start to consider distributing dividends again? Yep, that's all. Thanks.
Okay. Manfred?
Hi, Terence. Thanks for the question. This is a very popular question. Usually, towards the end of the session people will ask. Terence, we have guided the market now, , we will resume the repayment of the dividend, as soon as, , the company goes back into profitability, and also cash flow positive without government reliefs, right? So as you can understand, , we can't be taking reliefs and then use it to pay shareholders. That would not be right optically.
Now as you can see from the quarterly trend chart that I showed , this is the Q6 that we are EBITDA positive and then Q4 of consecutive profitability, but that is still with relief, but without relief, , the losses are narrowing to a bit above SGD 20 million for the Q3 . We are actually not quite out of the woods. We will continue to work towards, , getting back to the profitability and then resuming the repayment of dividend thereafter.
Sure. Can I have a follow-up question? Is the gearing ratio a consideration for you?
The gearing ratio is of course a consideration because it basically shows us how we are able to repay our debt if there was no profit. If there's profit, then there is a certain threshold that we aim at. Today it's standing at about less than 50%. Our threshold, we could go all the way up to about 1, but we generally, my board would not allow that. Conservatively, we'll be looking at a range of maybe 0.5-0.75. It has to be a good reason before we will load up the debt.
Yeah. Sure. Thanks so much.
Thank you. We have come to the end of the Q&A session. I will now hand the session back to Caroline. Please go ahead.
Okay, we come to the end of our session today. If you have more questions, you can continue to email us, and we will get back to you. Have a good evening, everyone. Bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.