Global recession forces ICTSI to defer expansion

MANILA, Philippines - Port operator International Container Terminal Services Inc. (ICTSI) has put on hold its domestic and foreign expansion plan, as the company said it expects the current global recession to continue throughout this year and into next year.

At the sidelines of the company’s stockholders’ meeting yesterday, ICTSI chairman and president Enrique Razon said he expects that the company will not be able to rebound from the 13 percent drop in its bottom line last year. “The whole of 2009 will not be a growth year,” he said.

“We are in a recession. What can you expect? There will be no rebound this year. We do not see revenues and net income improving this year. It will be very hard to expect an improvement this year,” Razon added.

But he pointed out that in the next two to three years, ICTSI will find new opportunities for growth. “We are in the midst of a crisis that we have never before experienced on a global basis. But we also believe that we will see opportunities that we have never seen before. And we will be in a good position to take advantage of these opportunities,” he said.

Razon, however, stressed that ICTSI will not be diversifying to create new revenue streams. “We want to focus on what we do best. And we are not selling any assets. Our capital expenditure is pre-funded. We have no debt maturities this year,” he said.

For this year, ICTSI is lowering its expenditures to P7.2 billion mainly for civil works and purchases of major cargo handling equipment in Manila, Brazil and Ecuador. In 2008, it invested P7.97 billion to expand handling capacity and improve operating efficiency in these three areas, as well as in Madagascar.

“There will be no expansion this year. Most of the projects this year are commitments we have made to government authorities or a continuation of existing ones,” according to Razon.

“The economic events that transpired in the second half of 2008 were like no other than any of us have ever experienced in the past. In 2009, we will probably see the first outright contraction of global GDP since the Second World War. Although the company’s revenue, volume and cash flow increased in 2008 over 2007, the growth occurred in the first nine months. This trend was reversed in the fourth quarter. In this environment, past performance is no indication of future results,” he stressed.

Even during the first quarter of 2009, Razon said the company felt the impact of the worldwide recession, with Philippine volumes down. Some areas, like Madagascar as well as Ecuador and Brazil where ICTSI operates, however, are doing better than they did last year, he pointed out.

In 2008, ICTSI’s net income went down 13 percent to P2.86 billion from P3.29 billion in 2007, mainly due to the retroactive adoption of the IFRIC 12-Accounting for Service Concession Agreements, as well as the weakening of currencies in countries where the company operates versus the dollar, especially during the last quarter of the year.