ICTSI reports lower 2Q results

International Container Terminal Services, Inc. (ICTSI) has reported consolidated unaudited financial results for the quarter ending 30 June 2009 posting second quarter revenue from port operations of US$96 million, a decrease of 18 percent over US$117.1 million reported last year; Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of US$41.5 million, down 19 percent from the US$51 million generated in the second quarter of 2008; and net income attributable to equity holders of US$12.2 million, a decrease of 33 percent over the US$18.2 million earned in the same period last year. 

The lower net income attributable to equity holders was mainly due to lower volume brought about by the decline in global trade, higher interest and financing charges, and the depreciation of currencies in the countries where ICTSI’s ports are located (Philippine peso, Brazilian reais, Euro) relative to the US dollar in the second quarter.  Excluding the after tax effect of one-time charges associated with debt refinancing, second quarter net income attributable to equity holders would have been US$2.6 million higher at US$14.8 million, a decrease of 19 percent over the same period in 2008. 

For the six months ending June 30, 2009, revenue from port operations decreased 17 percent, from US$227.2 million to US$188.8 million.  EBITDA also decreased 19 percent, from US$99.1 million to US$79.9 million.  Net income attributable to equity holders fell 39 percent, from US$37.7 million to US$23.2 million.  Excluding the effect of one-time charges associated with debt refinancing, first half net income attributable to equity holders would have been US$25.8 million, a decrease of 32 percent. 

Beginning 1 January 2009, ICTSI presented its financial statements in US dollars as it changed its functional and reporting currency from Philippine peso to US dollar in accordance with PAS 21 – “The Effects of Changes in Foreign Exchange Rates.”  The Philippine peso depreciated against the US dollar by 11 percent in the second quarter, from the P=42.93 average rate in 2008 to P=47.86 in the same period in 2009 and 14 percent in the first half, from the P=42 average rate in 2008 to P=47.83 in the same period in 2009.  For comparative purposes, 2008 second quarter and first half results have been translated to US dollars (summary income statements in both Philippine pesos and US dollars are included below this release).  ICTSI also adopted PFRS 8 – “Operating Segment,” and will be reporting results based on its main geographic regions:  Asia; Americas; and Europe, Middle East, and Africa (EMEA). 

Enrique K. Razon Jr., ICTSI Chairman and President, commented:  "The global economic environment continues to be challenging for ICTSI.  Nevertheless, we have succeeded in improving our EBITDA margins, and have also improved our financial flexibility by extending the maturity profile of our long term debt.  We are also beginning to see some positive trends in throughput volumes at a number of our terminals." 

ICTSI’s throughput in the second quarter was 9 percent lower at 834,188 twenty foot equivalent units (TEUs) compared to the 913,718 TEUs in the same period in 2008.  The 9 percent decline in the second quarter was slightly better than the 10 percent decline it registered in the first quarter this year, improving the Group’s year-to date consolidated volume decline to 9 percent.  For the six months ended 30 June 2009, total TEUs handled were 1,590,146 compared to 1,755,474 TEUs in 2008. 

Volume from the Company’s container terminal operations in Asia increased 1 percent in the second quarter of 2009 to 533,303 TEUs compared to the 530,126 TEUs it handled in the same period in 2008.  Consequently, the current quarter’s better performance compared to the 4 percent decline it experienced in the first quarter helped improve Asia segment’s year-to-date throughput to a marginal 2 percent decrease over the same period last year.  For the six months ended 30 June 2009, total TEUs handled by the Group’s container terminal operations in Asia was 1,007,711 TEUs compared to 1,024,949 TEUs in 2008.  ICTSI’s container terminal operations in Asia, comprised of the terminals in the Philippines, Indonesia, Japan, and China, accounted for 64 percent of consolidated volumes in the second quarter of the current year. 

The Company’s container terminal operations in the Americas, comprised of Brazil and Ecuador operations, was marginally lower by 2 percent in the second quarter of 2009 at 202,215 TEUs compared to the 206,268 TEUs handled in the same period in 2008.  The second quarter’s lower rate of decline of 2 percent compared to the 6 percent it posted in the first quarter resulted to a better year-to-date contraction in volume of 4 percent compared to the same six-month period in 2008.  The share of the container volume from the Americas slightly grew from 23 percent in the second quarter of 2008 to 24 percent this year. 
Container terminal operations in EMEA, comprised of terminals in Poland, Madagascar, Syria, and Georgia, handled 98,670 TEUs in the second quarter of 2009, 44 percent lower compared to the 177,324 TEUs handled in the same period in 2008.  The lower contribution from EMEA was mainly driven by the lower throughput from the Group’s Poland, Madagascar and Georgia container terminal operations, which posted volume declines of 56 percent, 15 percent, and 94 percent, respectively.  For the six months ended 30 June 2009, throughput from the Group’s EMEA segment was 41 percent lower at 188,624 TEUs compared to 321,024 TEUs in the same period in 2008.  EMEA accounted for 12 percent of the Group’s volume in the second quarter of 2009. 

Second quarter gross revenues from port operations decreased by 18 percent to US$96 million, from the US$117.1 million reported last year due mainly to lower revenue contribution from its key terminal operations in Manila, Brazil, Poland, and Madagascar.  Revenues from the existing business units, which accounted for 98 percent of the quarter’s consolidated revenue, was down 20 percent.  Consolidated yield per TEU for the second quarter dropped to US$115 from the US$123 in the first quarter of 2009 mainly due to lower storage revenues that resulted from shorter dwell time at most of the Company’s major container terminal operations.  For the six months ended 30 June 2009, gross revenues from port operations decreased by 17 percent to US$188.8 million from the US$227.2 million reported for the same period last year while the consolidated yield per TEU was at US$119. 
Revenue contribution from container terminal operations in Asia decreased 10 percent in the second quarter, from US$55.3 million in 2008 to U$49.6 million in 2009.  The second quarter’s better revenue contribution relative to the 13 percent decline it experienced in the first quarter helped improve the year-to-date contraction in gross revenue to 12 percent compared to the same six-month period in 2008.  The share of the revenues from its port operations in Asia to the Group grew from 47 percent in the second quarter of 2008 to 52 percent this year. 

Second quarter revenue contribution from container terminal operations in the Americas was 7 percent lower in the second quarter at US$33.1 million compared to U$35.7 million in 2008.  For the six months ended 30 June 2009, the revenue contribution from ICTSI’s container terminal operations in the Americas contracted by 4 percent compared to the same period in 2008.  Revenue contribution from the Company’s ports in the Americas grew, from 30 percent in the second quarter of 2008 to 35 percent in 2009. 

Container terminal operations in Europe, Middle East, and Africa (EMEA), which accounted for 14 percent of the Group’s revenue for the quarter, fell 49 percent from US$26.1 million in 2008 to U$13.3 million in 2009.  The revenue contribution decline from the EMEA segment was principally due to the decline in revenues in the Company’s terminals in Poland, Madagascar, and Georgia, which posted revenue declines of 63 percent, 31 percent, and 67 percent, respectively.  The year-to-date revenue contribution from the Company’s container terminal operations in EMEA contracted by 46 percent compared to the same period in 2008. 
Total consolidated cash operating expenses in the second quarter decreased 19 percent to US$40.9 million, from US$50.7 million in the same period in 2008 principally due to the lower levels of variable expenses (i.e. variable concession fees, fuel and power, and overtime pay) associated with the contraction in volume and the effects of cost containment measures that have been implemented across ICTSI terminals and cost centers.  For the six months ended 30 June 2008, total consolidated cash operating expenses totaled US$82.8 million, 15 percent lower than the US$97.9 million in the same period last year.

Consolidated EBITDA for the quarter ended 30 June 2009 decreased 19 percent to US$41.5 million, from US$51 million in the same quarter in 2008.  Consolidated EBITDA margin for the second quarter was relatively flat at 43.2 percent compared to the 43.6 percent in the same period in 2008. 

Consolidated financing costs and bank charges for the quarter, on the other hand, surged 79 percent to US$6.8 million, from US$3.8 million in the same period in 2008.  The increase was mainly due to higher debt level and the acceleration of the US$2.2 million unamortized portion of debt issuance cost related to the US$250 million revolving and term loan facility that was originally due in December 2010, but refinanced 18 months earlier in June 2009 to eliminate refinancing risk in 2010 and further pushed out substantial principal payments to the second half of 2011.  Total consolidated debt as of the end of the second quarter in 2009 amounted to US$429.6 million or an increase of 128 percent from the US$188.4 million registered in the same period in 2008.  Consolidated cash as of 30 June 2009 was 39 percent lower at US$136.6 million compared to US$222.8 million at the end of 2008. 

In the first six months of 2009, ICTSI invested US$61.3 million principally to improve operating efficiency and acquire container handling equipment at its port operations in Ecuador (Contecon Guayaquil SA).  For the full year 2009, the total estimated consolidated capital expenditures is US$146.9 million (P,=7.2 billion), mainly for civil works, systems improvement, and purchase of major cargo handling equipment at its port operations in Manila (Manila International Container Terminal), Brazil (Tecon Suape, S.A.), and Ecuador.  The Company expects to meet funding requirements for these expenditures from existing cash balance and internally generated funds. 

(Source: Transport Weekly)