ICTSI Posts Modest Net Income Growth for 9M14

Manila—(PHStocks)—International Container Terminal Services Inc. (PSE: ICT) reported unaudited consolidated financial results for the first nine months of 2014 posting revenue from port operations of US$779.2 million, an increase of 25 percent over the $624.7 million reported for the same period last year, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $326.1 million, 14 percent higher than the $285.5 million generated in the first nine months of 2013, and net income attributable to equity holders of $135.7 million, up five percent over the $128.8 million earned in the same period last year. Diluted earnings per share for the period was four percent higher at $0.056 from $0.054 in 2013.

The increase in net income attributable to equity holders for the first nine months of 2014 reflects the impact of higher container volume throughput levels due to the commencement of commercial operations at new terminals in Manzanillo, Mexico (CMSA) and Puerto Cortes, Honduras (OPC) as well as more favorable volume mix and increased revenues from ancillary services at several existing terminals. These positive factors were partially offset by increased depreciation charges and higher levels of interest expense driven by the commencement of commercial operations at CMSA and OPC.

In addition, net income for the first nine months of 2014 was positively impacted by the sale of a non-operating subsidiary in Cebu, Philippines ($13.2 million), the termination of the management contract in Kattupalli, India ($1.9 million), and the restructuring of the Company’s operations in Yantai, China ($31.8 million). These gains were reduced by a onetime non-cash charge of $38.1 million arising from the write-down of intangible assets at the Company’s terminal in Buenos Aires, Argentina (TECPLATA S.A.). Excluding these non-recurring items, net income for the first nine months would have been $126.3 million, or two percent lower than the $128.8 million reported in the prior year period.

For the quarter ending September 30, 2014, revenue from port operations increased 27 percent from $211 million to $268.9 million while EBITDA was 17 percent higher at $113.9 million from $97.3 million. Net income attributable to equity holders decreased 26 percent from $45.9 million to $34.1 million mainly due to the start up costs and consolidation of the operating expenses of the new terminals, lower capitalized borrowing cost at CMSA, and the recognition of $38.1 million impairment charge on intangible assets in TECPLATA Diluted earnings per share for the quarter decreased 32 percent to $0.013 from $0.019 in 2013. Excluding the non-recurring items, net income would have declined 10 percent to $41.2 million.

ICTSI handled consolidated volume of 5,410,224 twenty-foot equivalent units (TEU) for the first nine months of 2014, 17 percent more than the 4,628,117 TEUs handled in the same period in 2013. The increase in volume was mainly due to the volume generated by Contecon Manzanillo S.A. (CMSA) and Operadora Portuaria Centroamericana, S.A. de C.V (OPC), the Company’s new container terminals in Manzanillo, Mexico and Puerto Cortes, Honduras, respectively, the impact of the consolidation of terminal operations at the Port of Yantai in Yantai, China and the 23 percent volume growth in Baltic Container Terminal (BCT) in Gdynia, Poland. Excluding the volume from the two new terminals, organic volume growth would have been flat. The Company’s seven key terminal operations in Manila, Brazil, Poland, Madagascar, China, Ecuador and Pakistan, which grew by four percent, accounted for 70 percent of the Group’s consolidated volume in the first nine months of 2014. For the quarter ending September 30, 2014, total consolidated throughput was 15 percent higher at 1,844,200 TEUs compared to 1,601,112 TEUs in 2013. Excluding the volume from the Company’s new terminals, organic volume growth was minus one percent, principally due to the negative effect of the truck ban and related congestion issues at MICT, the Company’s largest facility in Manila, Philippines.

Gross revenues from port operations for the first nine months of 2014 surged 25 percent to $779.2 million from the $624.7 million reported in the same period in 2013. The increase in revenues was mainly due to the revenue contribution from the new terminals CMSA and OPC, a strong 39 percent revenue growth from the Company’s consolidated terminal operations in Yantai, China, favorable volume mix, and higher revenues from ancillary and other services. Excluding the revenues from the new terminals, organic revenue growth was eight percent. All three geographical segments reported double-digit growth in gross revenues with Americas posting a remarkable growth of 46 percent, followed by EMEA at 15 percent and Asia at 13 percent. The Group’s seven key terminal operations in Manila, Brazil, Poland, Madagascar, China, Ecuador and Pakistan, which registered a strong growth of 10 percent, accounted for 75 percent of the Group’s consolidated revenues in the first nine months of 2014. Gross revenues from port operations for the quarter ended September 30, 2014 increased 27 percent to $268.9 million from the $211 million reported in the same period in 2013.

Consolidated cash operating expenses in the first nine of 2014 grew 31 percent to $334.1 million from $255.5 million in the same period in 2013. The increase was mainly driven by higher volume-related expenses (i.e., on-call labor, fuel, power and repairs and maintenance), government-mandated and contracted salary rate increases in certain terminals, increased business development activities, and cash operating expenses and start-up costs of new terminals. Excluding the cash operating expenses of the new terminals, total cash operating expenses would have increased by only eight percent.

Consolidated EBITDA for the first nine of 2014 increased 14 percent to US$326.1 million from US$285.5 million in 2013 mainly due to the contribution from the new terminals in Puerto Cortes, Honduras and Manzanillo, Mexico, positive impact of the consolidation of operations at Yantai port, and stronger revenues from ancillary and other services. Meanwhile, consolidated EBITDA margin decreased to 42 percent in the first nine months of 2014 compared to 46 percent in the same period in 2013 mainly due to the effect of the new terminals and higher business development expenses as the Company pursued more new projects during the period. For the quarter ended September 30, 2014 consolidated EBITDA increased 17 percent to US$113.9 million from US$97.3 million in 2013 while consolidated EBITDA margin declined to 42 percent compared to 46 percent in the same period in 2013.

Financing charges and other expenses increased 13 percent from US$33.9 million in the first nine months of 2013 to US$ 38.4 million for the same period this year mainly due to the recognition of a US$38.1 million impairment charge on intangible assets at TECPLATA and the lower capitalized borrowing cost at CMSA.

Capital expenditures for the first nine months of 2014 amounted to $177.2 million, approximately 57 percent of the $310 million capital expenditure budget for the full year 2014. The established budget is mainly allocated for the completion of phase one development in the company’s new container terminals in Mexico and Argentina, and to start the development of the terminals in Honduras and Democratic Republic of Congo. In addition, ICTSI invested $39 million in the development of SPIA, its joint venture container terminal development project with PSA International Pte Ltd. (PSA) in Buenaventura, Colombia. The Company’s expected share for 2014 is approximately $120 million.

ICTSI is widely acknowledged to be a leading global developer, manager and operator of container terminals in the 50,000 to 2.5 million TEU/year range. ICTSI has an experience record that spans six continents and continues to pursue container terminal opportunities around the world.

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