Swissport: Thriving on Dr Samia’s Policies….?

TANZANIA: “ NUMBERS rule the universe,” declared Pythagoras, the renowned philosopher and mathematician of ancient Greece, who lived from around 570 to 495 BCE.

This statement underscores his profound belief in the power of quantitative analysis. Keeping this wisdom in mind, as we approach the 39th Annual General Meeting of Swissport Tanzania at the Hyatt Regency Dar es Salaam on June 14, 2024, we are set to thoroughly review Agenda Item 5: the 2023 audited financial statements of the company, which has a share structure of 51 per-cent owned by Swissport International Ltd. and 49 per-cent held by public investors traded on the Dar es Salaam Stock Exchange.

Swissport has recently demonstrated commendable performance within the aviation industry, with revenue soaring to 38.29bn/- in 2022, marking a notable 24.84 per cent increase from the previous year’s 30.68bn/-, according to published financials.

This upward trend continued into 2023, with revenue reaching 40.93bn/-, reflecting a growth of 6.91 per cent. Such figures are undoubtedly impressive and underscore Swissport’s alignment with the government’s push to elevate the aviation sector as a pivotal economic driver.

Investments in modern ground support and cargo infrastructure have not only boosted the company’s operational efficiency but have also ensured that it remains competitive in both regional and global markets.

However, the glittering numbers present in Swissport Tanzania’s financial statements invite a deeper investigation into the longterm sustainability of this growth. While the company benefits from the current favourable economic climate and market trends, such as the resurgence in air travel and cargo demand post-pandemic, these factors are inherently volatile.

Economic conditions, consumer behaviour, and trade policies are susceptible to rapid changes that could adversely affect cargo volumes and revenue streams.

The company’s reliance on high-volume cargo routes and specific services further compounds this risk, highlighting the need for a diversification strategy to mitigate dependency and enhance operational resilience. Swissport’s operating profit margin improved from 11.69 per cent in 2022 to 14.30 per cent in 2023, indicating effective management of operating expenses relative to revenue growth.

The net profit margin saw a remarkable increase, rising from 6.81 per cent in 2022 to 9.02 per-cent in 2023. Profit before tax grew by 38 per cent, from 3.96bn/- in 2022 to 5.46bn/- in 2023.

Additionally, the return on assets (ROA) improved from 5.86 per-cent in 2022 to 8.20 per-cent in 2023 whilst the return on equity (ROE) increased from 8.36 per cent to 11.07 per cent over the same period.

Swissport Tanzania’s strategic alignment with government policies and initiatives has provided strategic advantages, including may be potential subsidies or support.

However, if this may be the case, then it may be a trojan horse by also exposing the company to regulatory and political risks. Any shift in government priorities away from the aviation sector could lead to reduced support or unfavourable regulatory changes, impacting Swissport’s business operations and strategic goals.

In addition, the focus on enhancing operational efficiency through capital-intensive investments must be balanced against the need for operational flexibility. In a dynamic global market, the ability to swiftly adapt to new challenges and opportunities is as crucial as improving efficiency.

The company’s financial stability has improved, as evidenced by its enhanced liquidity and reduced financial leverage. The current ratio, which measures the company’s ability to cover short-term obligations with its short-term assets, increased from 1.91 in 2022 to 2.22 in 2023.

Additionally, the debt-to-equity ratio decreased from 0.43 to 0.35, indicating a more conservative approach to debt management and a reduction in financial risk.

These improvements are indeed a testament to the strategic thinking of Mr Yassin, the current chief executive officer whose intention of fostering a financially stable and resilient company that is capable of withstanding economic fluctuations is coming to fruition.

Yet, as Swissport continues to expand, the potential for market saturation, particularly in a developing economy like Tanzania, could lead to diminishing returns.

Increased competition from other local or international players if they so happen to enter the market abruptly, could also pressure margins and market share. To sustain its growth and secure long-term success, Swissport must remain agile, proactive in its strategic planning, and vigilant in monitoring both global and local economic indicators and market trends.

As the Romans succinctly put it, “summa summarum” or “all in all” in simpler English, it is my belief that even though Swissport Tanzania’s notable achievements deserve recognition, the company confronts several challenges that could influence its future growth and stability.

It is imperative for shareholders at the upcoming AGM to stress the importance of maintaining strategic flexibility, continuously innovating, and diversifying service offerings.

By doing so, Swissport can adeptly navigate potential economic and industry-specific challenges, thereby securing its continued success in the competitive aviation market of the East African Region.