Abstract
Philippine-owned port operator International Container Terminal Services Inc
(ICTSI) in May
announced its financial results for Q109, revealing a 44%
year-on-year (y-o-y) drop in net income. ICTSI
recorded net income of
US$11mn as revenues over the quarter fell by 16% y-o-y to US$92.8mn. The
company attributed the decrease in its profit margin to the impact of lower
global trade volumes as well
as the effect of the depreciation of the
Philippine peso and Brazilian real, the currencies in which its core
revenue was received, against the US dollar. Despite the decline, however,
ICTSI chairman Enrique K.
Razon Jr said the results were ‘better
than expected’ given the tough operating environment in which the
company found itself. BMI notes that the steepest drop in revenue was recorded
by the group’s EMEA
operations, which comprise of terminals managed
in Poland, Georgia, Syria and Madagascar, income
from which fell by 42%
y-o-y to US$13.93mn. BMI believes the effect of declining terminal activity
has
been exacerbated by additional factors relating to recent major
expansions to its global operations.
BMI’s newly released
Philippines Freight Transport Report notes that overall cargo volume in
the
country should grow by an annual average of 2.9% in the 2009-2013
period, down from 4.7% in the
preceding five years. Bearing in mind the
impact of the global recession, the outlook for the Philippines
economy
over the next five years is for moderate to slow growth, averaging 3.3% per
annum in 2009-
2013. The effect is to give freight a reasonable platform
for development, although companies will face
greater pressure on their
margins than before. While in many developing economies freight growth
usually exceeds GDP growth by a significant margin, the fact that we see it
falling behind the wider
economy shows the extent to which the transport
sector is failing to live up to its full potential.
The air freight sector
is expected to experience the most significant growth rate, averaging 4.3%
y-o-y.
This takes into account cooling demand in the sector. Next in
importance will be rail freight, growing by
4.0% from a low base as a
result of the Northrail and Southrail projects. We see shipping growing by
only
1.5%, pulled down by the steep fall in foreign trade in 2009. One
constraint facing the freight industry is
the environment in which it
operates. Comparatively speaking, the Philippines’ BMI freight rating is
a
little disappointing in comparison with regional peers, with an overall
score of 47.4 (out of a potential
100). Under most categories, the
national industry received a medium to low score. Freight and
infrastructure growth rates, together with the transport intensity index (a
measure of the dynamism of
foreign trade) are all at the lower end of the
scale.
For the 2009-2013 forecast period, we expect the transport and
communications sector to outpace the
economy as a whole by a small margin,
as far as value of output is concerned. It will achieve average
annual
growth of 3.6%, versus 3.3% for overall GDP. Again, the gap between these two
rates is narrower
than experienced in many other emerging economies. The
total value of transport and communications
GDP will rise to US$17.8bn in
nominal terms by 2013, representing 7.2% of the Philippines’ GDP.
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