ICTSI yearend income down by 2%

February 27, 1998 PSE CIRCULAR FOR BROKERS NO. 234-98 February 25, 1998 PRESS RELEASE ICTSI yearend income down by 2% International Container Terminal Services, Inc. (ICTSI) posted a 1997 unaudited yearend recurring consolidated net income of PhP463 million, 2 per cent lower than the 1996 net income of PhP475 million. cdlex The decrease in the company's earnings has been attributed primarily to the repercussions brought about by a decline in the growth of containerized cargo handled at the Manila International Container Terminal, a delay in the implementation of increased tariff rates at the MICT, and the depreciation of the Philippine peso. Volume at the MICT grew by only 6 per cent, from 848,017 TEUs in 1996 to 901,881 TEUs in 1997. There was a marked decrease in import containers, which grew by only 5 per cent, compared to an average growth rate of 13 per cent in the past four years. The first tranche or 15 per cent of the approved rate increase in cargo charges of 25 per cent was effected only in September 1997. The second tranche will be effected only on 1 March 1998, while a 20 per cent increase in other cargo handling charges was effected only on 1 January this year. As a result of the Philippine peso depreciation and higher interest rates experienced starting the second semester of the year, ICTSI's net interest expenses grew by almost 46 per cent, from PhP207 million in 1996 to PhP302 million in 1997. Moreover, the company has had to revalue its foreign currency-denominated loans, resulting in unrealized foreign exchange losses. The amortized portion to be booked for 1997 amounts to approximately PhP81 million. ICTSI also booked extraordinary items which affected the company's net income. The first involves a loss on the extinguishment of debt amounting to PhP64 million resulting from the swap of US$45 million of the 5 per cent convertible notes into US$48.4 million of the 1.75 per cent convertible notes issued in February 1997 amounting to PhP64 million. The second involves the one-time cost of labor restructuring of PhP15.2 million. Lastly, ICTSI also booked foreign exchange losses of PhP4 million for the year. The company's net income was bolstered by the excellent showing of its foreign subsidiaries. Buenos Aires Container Terminal Services, S. A. in Argentina posted an estimated profit after tax of US$7.8 million from a loss of US1.6 million in 1996. Estimated net-earnings generated by Internacional de Contenedores Asociados de Veracruz, S. A. de C. V. in Mexico grew by 49 per cent, from US$4.4 million in 1996 to US$6.6 million in 1997. ICTSI's equity in net earnings from these subsidiaries grew by 240 per cent, from PhP75 million in 1996 to PhP255 million in 1997. cdlex Consolidated revenues for the year increased by 6 per cent, from PhP2.5 billion in 1996 to PhP2.7 billion in 1997. Net revenues grew by only 1.6 per cent as the increase in fees payable to the Philippine Ports Authority (PPA) of 10 per cent outpaced revenue growth. This can be attributed to the increase in the variable fees paid to the PPA, which grew from 17.5 per cent to 20 per cent; the increase in fixed fees paid to the PPA, from US$9.6 million in 1996 to US$10.2 million in 1997; and the impact of the peso depreciation on the US dollar-denominated fixed PPA fees. Income from operations decreased by 12 per cent, from PhP800 million in 1996 to PhP703 million in 1997. The reduction in operating profits is a result of the increase in Operating expenses, which grew by 12 per cent, from PhP10.8 billion in 1996 to PhP1.22 billion in 1997. Depreciation expenses increased by 19 per cent resulting from the acquisition during the year of more container handling equipment and the revaluation due to the peso depreciation. Equipment-related expenses, particularly equipment and facilities repairs grew by 22 per cent even as administrative costs increased by 17 per cent. Net of extraordinary losses, ICTSI's consolidated after tax earnings amounted to PhP299 million, 37 per cent lower than the 1996 net profit of PhP475 million. pred