Nenaco in talks with 2 local shippers for P600-M infusion

Negros Navigation Co. Inc. (Nenaco), the shipping unit of Metro Pacific Corp., is in talks with two local shipping firms for the immediate infusion of at least P600 million in fresh capital to expand its current fleet and fortify its hold in the local shipping industry.

In a press briefing yesterday, Nenaco chief adviser to the president, Seumas Gallacher said: "We are talking to two possible significant partners which are both engaged in the shipping business.  We will make the necessary disclosures as soon as negotiations are completed."

Gallacher said Metro Pacific, which holds a 97-percent stake in Nenaco, is willing to divest as much as 46 percent of its interest to accommodate the entry of strategic partners.  "Metro Pacific would like to maintain a majority stake in Nenaco.  They would like to retain 51 percent plus more," he said.

 He said the money that will infused into Nenaco will be used to invest in hard equipment and new vessels to further improve its performance.

 Gallacher is also not discounting the possibility of a merger if it would prove to be the best option to optimize efficiencies.  "If a merger comes out as the best mechanism, we’re open to that," he said.

 As it intends to build up its financial strength, Nenaco plans to divest certain assets including old container yards in Iloilo and Bacolod, to pare down debts.  Its bank loans stood at P794 million, as the company hopes to raise between P50 million to P80 million from the sale of assets.

 Meanwhile, Nenaco announced that its first half profit this year amounted to P62.7 million or an increase of 19 percent from the P52.5 million reported the previous year.  The improvement was attributed to sustained reductions in overhead expenses and financing and tax charges, a result of Nenaco’s ongoing business restructuring program as well as stable performance from its passage and freight shipping divisions.

Consolidated revenues slightly went up to P1.31 billion from P1.37 billion due to a temporary reduction in freight capacity resulting from the holding of the Nuestra Senora de Fatima by the Philippine Coast Guard at the Port of Batangas in early 2003.

As a result, income from operations declined by 34.74 percent from P396.6 million to P258.8 million.

The Fatima had been held pending resolution of a joint investigation between the PCG and Nenaco management after it was discovered that the company had been the victim of an illegal smuggling operation.

 At the end of the investigation, Nenaco was cleared as it was found to be an unknowing victim of that operation. The ship was released during the second quarter of 2003 and returned to full service.

Nenaco contined to implement strict cost reductions during the first half and reduced overhead expenses by 10 percent to P129.5 million from P144.7 million.  Consolidated operating costs rose marginally to P1.1 billion compared with P975 million due to increased terminal operating costs and larger marketing and promotional expenditures.

Nenaco’s freight division contributed revenues of P483 million as against P518 million while passage division revenues stood at P781 million compared with P824 million a year ago.

The company said it will continue to focus on beefing up its operations to strengthen its position as the country’s second largest inter-island shipping company.

Nenaco will step up aggressive sales and marketing efforts in Metro Manila and key regional cities, and enhance focus on core transportation business.