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By Darwin G. Amojelar, Reporter
THE anticipated slump in export and tourism growth next year could
further squeeze shipping firms’ margins, forcing them to postpone
fleet expansion.
Philippine economic managers earlier announced
that exports growth might be flat, and even contract by 2 percent in
2009, as consumer spending in the US, the country’s biggest
market, started to decline. Economic growth is expected to slow down
to between 4.1 percent and 5.1 percent next year.
The US government reported a 0.3-percent
contraction in its gross domestic product (GDP) in the third
quarter, its worst since 2001. The contraction was blamed on an
8.7-percent decline in Americans’ consumer spending.
In the first eight months of the year,
Philippine exports grew by only 4.4 percent to $34.423 billion with
sales to the US declining 14.9 percent.
The local tourism industry is also expected to
slow down with Filipinos living in the US and other foreigners
deferring trips.
Tourist arrivals in the first seven months this
year have so far grown 6.1 percent to 1.92 million, according to the
Department of Tourism.
For shipping firms, lower international trade,
tourism and slower economic growth could dampen their revenues.
As it is, competition from budget airlines is
already putting a dent on shipping firms’ revenues.
Joy Maitim, executive director of the Philippine
Shipping Line Association (PLSA) told The Manila Times that the
global financial crisis has begun hurting the industry.
“[Shipping firms] started to feel the impact
of the crisis. The months of October and November are usually peak
season, but the volume of cargo remains weak,” he said.
The industry official said the effects of the
global slowdown might worsen next year as international trade is
expected to decline.
Data from the Philippine Ports Authority (PPA)
showed that cargo volume fell 7.3 percent to 97.2 million metric
tons (MMT) from 105 MMT last year.
“Neither domestic nor foreign cargoes showed
promising performance as total volume dropped by 6.01 percent and
8.42 percent, respectively,” the PPA said.
The agency said export and import cargoes both
contracted by 14.15 percent and 4.45 percent, respectively.
Passenger volume during the period also posted
flat growth at 30.15 million, or a mere 0.56 percent increase from
last year.
“The continuing volume drop is attributable to
the ongoing reduced promo rates of airlines, which pressured Super
Ferry to reduce its vessel trips plying the General
Santos-Iloilo-Manila route,” the PPA said.
Profit down on
higher fuel prices
Sulficio Tagud Jr., Negros Navigation Co.
(Nenaco) chairman and chief executive, said he expects top line to
squeeze next year because of lower cargo and passenger volumes.
“We expect [the] transport business to slow
down next year as a consequence of the global economic slowdown,”
he said.
“While gross revenue remains flat, profits are
down because of higher fuel prices,” he said.
Tagud said the company’s net income may hit
between P100 million and P120 million this year, down by P70 million
from last year.
In the firs six months of the year, the company
posted a net income of P135 million, while gross revenue amounted to
a billion pesos.
Last year, Nenaco earned P298 million, of which
P100 million was non-recurring due to the sale of vessels.
Andrew Deyto, SuperFerry assistant vice
president for sales and marketing, agreed that 2009 would be a
challenging year for the industry.
SuperFerry’s parent firm Aboitiz Transport
System Corp. (ATS) reported a net loss of P49.4 million in the first
nine months this year, a reversal from last year’s profit of
P480.8 million.
The company attributed the decline to costlier
fuel and weak passenger revenues because of the fierce competition
from airlines.
The company’s passage revenues fell 6 percent
to P2 billion from P2.1 billion last year.
“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,” ATS said.
Freight revenues, on the other hand, increased
14 percent to P5.7 billion in the first nine months of the year.
“Contributing to the rise in freight revenues
is its international charter as well as the increase in rates in the
domestic cargo business,” the company said.
ATS has been converting unused passage capacity
of existing SuperFerry vessels to roll-on, roll-off (RORO) and
container capacity as part of its shift in focus.
Astro del Castillo, managing director of First
Grade Holdings said shipping firms will be facing “rough waters”
next year given the weak export and tourism growth.
“Definitely, the crisis will have an impact to
the shipping firms’ margins,” he said.
He added that a raft of sea tragedies come at a
bad time, undercutting the industry’s growth prospects.
Access to credit
With the current financial crisis, Castillo said
the global credit crunch could also hurt the industry’s planned
fleet expansion.
“Access to credit is important to the industry
right now,” he said.
Gloria Banas, Maritime Industry Authority
(MARINA) deputy administrator for planning said the government has a
credit facility program to assist shipping companies in financing
the acquisition of new vessels.
“In the short term, we may not feel it because
government has put in place a mechanism to cushion the impact of the
global financial crisis, probably in terms of giving loan
assistance,” she said.
The Marina official said that state-run
Development Bank of the Philippines and the National Maritime
Leasing Corp. are giving financial support.
“If they are willing and qualified they can
avail [of] these financial packages,” she added.
Deyto said he remains optimistic about the
growth prospects of the company next year as ATS is focusing more on
value added services other than cargo.
Unit 2GO earlier acquired Reefer Van Specialist
Inc. and Refrigerated Transport Services Inc. for its entry into the
transport of perishable goods or cold chain service.
The company also bought Scanasia Overseas Inc.
to strengthen 2GO’s supply chain business.
Scanasia is engaged in the business of sales,
marketing, warehousing and transportation of temperature-controlled
and ambient food products to its customers in the Philippines.
Deyto said the slowdown in the tourism industry
would not have a significant impact on the company’s passage
business.
“We are not dependent in the tourism growth
[as] our market is the masses,” he added.
For its part, Nenaco is banking on the
acquisition of ATS to deliver growth, as this gives flexibility to
service more markets without the additional cost.
With the undercapacity in cargo operation owing
to the suspension of Sulpicio Lines, Nenaco would be able to serve a
bigger market.
“We will be expanding further the capacity of
our cargo business,” Tagud said, adding the company will acquire
two more cargo vessels in the next six months.
At present, ATS’ market share in the cargo
segment stood at 35 percent, while Nenaco has 10 percent. ATS’
passenger market share stands at 70 percent while Nenaco has 30
percent.
Aboitiz Equity Venture Inc. and Aboitiz &
Co. earlier sold their shares in ATS to KGLI-NM Holdings Inc.
(KGLI-NM) at a price of P5 billion or equivalent to P2.044 a share.
The purchase agreement is expected to close on
January 15, 2009, unless shortened or extended by the parties.
KGLI-NM is a domestic company jointly owned by
Negros Holdings and Management Corp. (NHMC) and KGL Investment BV
(KGLIBV). NHMC, a domestic company, and KGLIBV, a Dutch company,
hold 60 percent and 40 percent, respectively, of the outstanding
capital stock of KGLI-NM. KGLIBV is beneficially owned by the KGL
Investment Company (KGL Investment), a Kuwaiti firm.
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