November 18, 2014

ICT reports 5% growth in 9M14 net income of $135m

In a teleconference, International Container Terminal Services Inc said its 9M14 net income grew 5% YoY to $135m. This represented a slowdown from the 1H14 numbers. The 3Q14 net income declined by 26% to $34m due to a one-time non-cash write-down of intangible assets related to its Argentinian investment. Stripping out one-time items, we compute the 3Q14 net income to have declined by 13% instead of 26%.

The company partly attributes this to the Manila port congestion due to the truck ban which caused volumes in Manila to fall. The ban, however, was fully lifted by September and ICT expects a strong recovery for Manila in 4Q14 as the port congestion eases. ICT further noted that volumes recorded for October and November showed healthy growth YoY as shipping lines resume regular calls in Manila.

The 3Q14 results were likewise affected by start-up costs pertaining to its ports in Mexico and the Honduras which started early this year. Moreover, its volumes in Argentina were likewise significantly affected by the technical default of the government on its renegotiated sovereign bonds. This has caused the Argentine peso to devaluate from USD1= ARS5 in the beginning of the year to USD1:ARS8.5 today. This has caused volumes to drop by 22% and has pushed the company to make the discretionary step to write-down the intangibles in its books related to its Argentinian operations such as goodwill.

Our take: If the Argentinian government gets a favorable ruling on an ongoing arbitration by 1H15, ICT believes that this can cause trade with the country to recover strongly. This, coupled by the improvements in the Manila operations, should enable the company to recover strongly going forward. At any rate, ICT’s 9M14 net income accounts for 80% of the full-year consensus forecast. – WealthSec