MANILA, Philippines – Port operator International Container Terminal Services, Incorporated (ICTSI) finished the first half of 2024 strong, growing its net income by 34% despite continued geopolitical uncertainties that could affect the global trade network that it facilitates.
ICTSI reported a net income attributable to equity holders of $420.55 million from January to June 2024, 34% higher than the $313.80 million it earned in the same period last year. Port operations revenue also grew by 13% to hit $1.32 billion while its earnings before interest, taxes, depreciation, and amortization or EBITDA saw a 19% increase to $864.99 million.
ICTSI also noted that net income attributable to equity holders included nonrecurring income from the settlement of its legal claims at ICTSI Oregon, for which the company received $20.5 million in March 2024; and the deconsolidation of its affiliated company in Indonesia, PT PBM Olah Jasa Andal, for a net loss of $1.6 million. Excluding these, its recurring net income would stand at $401.69 million, up 24%.
The company attributed its bottom-line growth to “higher operating income, partially tapered by increase in interest on loans and lease liabilities related to concession renewal.”
“We’ve delivered a strong first half performance, yet again demonstrating the strength of ICTSI’s diversified international portfolio and continued delivery of our strategic initiatives,” ICTSI chairman and president Enrique Razon Jr. said in a stock market disclosure on Monday, August 12.
Although flourishing global trade has made the ports and casino billionaire the Philippines’ second richest person, Razon is keeping an eye out for geopolitical conflicts that could disrupt the trade network that his business empire relies on.
“While we remain vigilant of continuing economic and geopolitical uncertainty, we have a proven and sustainable growth strategy which gives us confidence in our outlook and continued ability to generate value for all our stakeholders,” Razon said on Monday.
In the notes to ICTSI’s second quarter financial statements, the company flagged the Russia-Ukraine and Israel-Hamas conflicts as two events that could “disrupt businesses and institutions and pose threats to world trade and economies, in general,” although it added that the events so far have had “no material impact on the Group’s business.”
“The scale and duration of these developments and events remain uncertain…. It is not possible to estimate the overall impact of the wars’ near-term and longer effects. The Group will continue to closely monitor the progress of these situations,” the company said in its quarterly report.
Closer to home, there is also the fear of rising tensions between the Philippines and China over the West Philippine Sea. If conflict were to break out, it would almost certainly devastate the deep economic ties between the two countries, given that China is the Philippines’ top trading partner. ICTSI operates one port in Shandong, China, through its Yantai International Container Terminals subsidiary.
Strong revenue growth in the Americas
ICTSI has operations across six continents, which provides it with a buffer against localized disruptions and challenges in specific regions. Roughly 50% of its consolidated cargo volume comes from its terminals in the Americas region and the Europe, Middle East, and Africa (EMEA) region.
In the first half of 2024, volumes in both these regions contracted, with volume in the Americas experiencing a 3.2% decline, while EMEA volume fell by 10.6% mostly due to the expiration of a concession contract at a port in Pakistan. Despite this, ICTSI finished the half with a marginal growth of 0.6% due to volume from its Asia segment increasing by 7.1%.
But consolidated volume doesn’t tell the full story. Even though volume in the Americas declined, gross revenue from port operations in the region grew 39.1% to $539.4 million in H1 2024 from $387.9 million a year ago. The port operator attributed this mainly to “higher revenues from ancillary services, tariff adjustments and volume growth with favorable container mix largely at [subsidiaries] CMSA, ICTSI Rio, and TSSA; and net favorable translation impact of foreign currency-denominated revenues against [the] US dollar.”
This means that ICTSI’s American port operations made up the largest portion of the company’s overall port revenues in the first half of the year, even surpassing the $536.9-million revenue generated from its Asian operations.
ICTSI also continues to invest heavily in expanding its operations, with capital expenditures reaching $185.72 million in the first half of 2024. It has ongoing expansions in key markets such as Mexico, Brazil, the Philippines, the Democratic Republic of Congo, and Indonesia.
“We have a robust balance sheet and cash generation is strong with free cash flow up 24% to $602 million, which means we have significant headroom to invest for future growth,” ports magnate Razon said. – Rappler.com