ATS revenues up 13% in first three quarters

Aboitiz Transport System Corporation (‘ATS’) registered total consolidated revenues of P9.4 billion for the nine-month period ending September 30, 2008, a 13% improvement versus P8.3 billion in 2007.

Freight revenues, which constitute the bulk of the revenues increased 14% versus last year to reach close to P5.7 billion in 2008. Contributing to the rise in freight revenues is its international charter as well as the increase in rates in the domestic cargo business.

Passage revenues totaled P2.0 billion, 6% lower versus P2.1 billion in 2007. The decline is largely a result of the overall reduction in passenger ferry capacity brought about by vessel sales and the conversion of excess passage capacity of some vessels to freight. Two vessels also underwent repair during the second quarter of the year. Moreover, the industry continues to face fierce competition from the airlines.

ATS assets maintain high utilization rates with passenger and freight at over 70% and 90%, respectively. However, the real purchasing power of customers is unable to absorb the price increases that would be necessary to cover the rapid and consistent increases in the price of fuel. ATS expects to enjoy increasing margins as fuel prices come down.

The development of the company’s supply chain management solutions business led the 57% growth in service fees, from P903.5 million in 2007 to P1,415.9 million in 2008. ATS continues to expand its value-added business. Aboitiz One Distribution, Inc.’s new warehouse with 21,000 pallets positions located in Taguig City, is expected to be completed in the last quarter of 2008. In June 2008, Aboitiz One, Inc. purchased Scanasia Overseas, Inc., a company engaged in the business of sales, marketing, warehousing and transportation of temperature-controlled and ambient food products to its customers in the Philippines. The company believes much of its future will lie on its value added businesses. Freight capacity is being filled up with its own supply chain and value added business reducing the reliance of spot and market cargo that is more price driven than value driven. Today, ATS’ own value added cargo comprises 40% of the total cargo business.

Total costs and expenses jumped 17% resulting to a net loss attributable to equity holders of parent of P49.4 million compared to a net income of P480.8 million in 2007. Charter-related expenses and higher fuel are among the major contributors to the rise in costs. Furthermore, ATS last year registered after tax gain on disposal of vessels of P402 million.

Fuel costs continue to be a challenge for the company. To help mitigate the negative impact of this to its margins, the company has been transforming itself into a value added service organization with its efforts focused on integrating   its services to build complete supply chain management solutions.

As of September 30, 2008, consolidated assets of ATS amounted to P9.6 billion and Cash and Cash equivalents stood at P920.7 million. Total interest bearing debt was at P1.1 Billion. Stockholders’ Equity remained at P4.5 billion, the same level as December 31, 2007.

In September 2008, the major shareholders of ATS, Aboitiz Equity Ventures, Inc. and Aboitiz & Company, Inc., accepted the unsolicited offer of KGLI-NM Holdings, Inc. (KGLI-NM) to buy all of their shareholdings subject to a due diligence audit. The planned acquisition, which is expected to close by January, 2009, will include all of the shipping and logistics businesses of ATS except the Aboitiz Jebsen Group. KGLI-NM is a domestic company, which is jointly owned by Negros Holdings and Management Corporation (NHMC) and KGL Investment BV (KGLIBV), which is beneficially owned by the KGL Investment Company, a Kuwaiti company.