5 aircraft customers intend not to renew the lease after expiration, and the annual income of 200 million yuan of Rifa Precision Machinery is going to "fly".

Every reporter: Xu Shuai Every editor: Zhang Haini

On the evening of November 3, Rifa Precision Machinery (002520. SZ, share price 5.58 yuan, market value 4.465 billion yuan) disclosed that the major contract was not renewed, and the customer did not choose to renew the lease of the subsidiary's 5 737 aircraft, and the contract will be terminated on May 31, 2024. You must know that Rifa Precision Machinery realized 200 million yuan in aircraft leasing revenue from this customer last year.

The reporter of "Daily Economic News" noticed that the aircraft leasing business of Rifa Precision Machinery can be called ill-fated, because the aircraft was detained and the customer did not properly take care of the aircraft, resulting in asset impairment provisions, amounting to more than 700 million yuan.

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This customer accounts for 10% of revenue

Airwork Holdings Limited (hereinafter referred to as "Airwork"), a wholly-owned subsidiary of Rifa Seiki, recently received a notice from its customer Team Global Express (hereinafter referred to as "TGE", formerly known as Toll Holdings Limited, hereinafter referred to as "TOLL") that the relevant aircraft lease contract will not be renewed after the expiration of May 31, 2024.

Airwork and TGE/TOLL have been cooperating since 30 April 2007, during which Airwork provided aircraft leasing services to TGE/TOLL on a wet-lease basis. The partnership will take the form of a lease of five 737 aircraft from TGE from June 1, 2022 to May 31, 2024. The parties are billed using a combination of fixed rentals and variable rentals calculated on a per-hour basis, which is expected to generate NZ$97.02 million in lease revenue over the lease period.

The reporter of "Daily Economic News" noticed that last year, Airwork's operating income was 1.09 billion yuan, and in the first three quarters of this year, it was 579 million yuan. Airwork's revenue from leasing to TGE was $215 million last year and $157 million in the first three quarters of this year. The above-mentioned leasing revenue in the latest year and period accounted for 20% and 27% of Airwork's operating income respectively, and accounted for 10% and 11% of the overall operating income of the listed company respectively.

According to last year's revenue estimates, if the customer does not renew the lease, Rifa Precision Machinery will lose 200 million revenue a year.

Although Airwork achieved a revenue of 1.09 billion yuan last year, its net profit loss was 1.05 billion yuan, and in the first three quarters of this year, Airwork lost 22.827 million yuan. Interestingly, last year's loss net profit was close to revenue, but the net cash flow from operating activities was still a net inflow of 250 million yuan.

5 aircraft were detained, and more than 700 million yuan was impaired

Nita Seiki said that since the expiration date of the above-mentioned contract is May 31, 2024, it will not have an impact on the operating income of Airwork and the listed company in the current year, but it is expected to have a certain impact on the operating income of Airwork and the listed company in the future fiscal year; At the same time, it may also bring impairment risk to the relevant aircraft assets.

The reporter noted that Airwork's business was ill-fated, and the aircraft assets had also suffered asset impairment and disposal.

At the end of last year, Airwork had 36 fixed-wing aircraft, including 22 Boeing B737 aircraft, 12 Boeing B757 aircraft (5 of which were detained in Russia), and 2 Airbus A321 aircraft; It has 24 fixed-wing aircraft (excluding 5 aircraft detained in Russia), 22 737 aircraft and 2 757 aircraft, respectively, in operation with customers in Oceania, North America, Europe, Africa and Asia. However, the outbreak of geopolitical conflicts has caused uncertainties in the international economic and trade environment, and Airwork's aircraft leasing relationship with Russian customers has to be terminated. Five of Airwork's aircraft were detained in Russia, and the company and Airwork had tried unsuccessfully to retrieve them in various ways. In 2022, Airwork made a full asset impairment provision for five Boeing 757 aircraft detained in Russia, amounting to more than 700 million yuan. Depending on the progress of the situation, Airwork filed a claim in accordance with the insurance agreement.

After the termination of the business alliance between Airwork and Olympus, the operation rights of the two A321 aircraft were withdrawn from Olympus. After a thorough inspection of the aircraft, Airwork concluded that there were certain signs of impairment of the aircraft due to Olympus' breach of contract and failure to properly maintain and keep the aircraft. After assessing its recoverable amount, Airwork made an asset impairment provision of RMB102 million for the two A321 aircraft recovered from Olympus in the third quarter of 2022.

On December 31, 2022, due to market changes such as the early termination of leases by the original lessees of some aircraft assets, the recoverable amount of the aircraft assets was lower than the carrying amount of its aircraft, and the Company evaluated the recoverable amount of the relevant aircraft assets in 2022 and confirmed an asset impairment loss of NZ$33,058,400 (equivalent to RMB 146 million) based on the evaluation results.

In the 2022 annual report, Rifa Seiki warned of the risk that Airwork's operating performance in 2023 may not meet expectations, which will affect the company's overall operating performance and profitability.

In addition, in April 2019, Airwork and its 15 holding companies entered into syndicated loan contracts with all of their existing and future holdings (i.e., April 2019 and beyond) as collateral. As at 31 October 2023, the balance of the loan was NZ$192 million. In the above matters, Airwork has informed the relevant syndicate that there is a risk that the syndicate will trigger the syndicate to require Airwork to repay the loan in advance and cancel the credit, which may also lead to the risk of Airwork's sustainable operation. At present, Airwork is actively communicating with the syndicate of banks on this matter to avoid such risks as much as possible.

National Business Daily