Lorenzo Shipping profits in 2014 despite port congestion

 

MANILA, Philippines – Domestic shipping liner Lorenzo Shipping Corporation (LSC) ended what was a troubling year for the domestic shipping industry on a good note.

LSC president Roberto Umali said the start of 2014 was a challenging year for the domestic shipping industry and for the company, as the city government of Manila instituted a truck ban despite industry stakeholders’ strong objections.

“It affected our productivity and raised costs,” Umali said at the shipping lines annual shareholders meeting Thursday, June 25.

The truck ban resulted in massive port congestion that only abated after the Palace ended the truck ban 7 months later, he added.

The port congestion convinced LSC to adopt new strategies to increase productivity, such as utilizing gantry cranes at Manila port to speed up ship turnaround.

This, however, did not fully rectify the problem partly due to construction at Manila North harbor, one of Manila’s 4 ports of call, Umali confirmed.

“We experienced the same docking congestion due to the number of vessels calling on Cebu, Iloilo, and Zamboanga ports. Foreign vessels are prioritized over domestic vessels,” he said.

This remains to be one of the foremost issues that the Philippine Liner Shipping Association (PLSA), which LSC is a part of, continues to bring to the attention of the Philippine Ports Authority (PPA).

“With the increasing number of vessels without corresponding port development and modernization, we will continue to experience berthing congestion,” Umali warned.

LSC was founded and incorporated in October 1972 by the Go family to engage in domestic inter-island cargo handling business. Through the years, it evolved from that of being a break-bulk cargo carrier to a fully containerized cargo shipping company.

2014 results

Despite the challenging start, LSC ended 2014 with a net income after tax of P43.7 million ($967,936), up from the P10 million ($221,495) in 2013.

LSC’s total revenue for fiscal year 2014 amounted to P2 billion ($44.3 million), higher by almost P170 million ($3.7 million) or 9% compared to P1.8 billion ($39.8 million) in 2013.

This represented LSC’s highest revenue in 10 years, Umali said.

The increase in revenues is attributable to the 6.6% growth in volume and 2.3% increase in freight rates despite the increase in costs.

Direct costs, consisting of services and terminal expenses increased by almost 4% from 1.7 billion ($37.6 million) in 2013, to P1.74 billion ($38.5 million) in 2014.

Cost of services, which include cargo expenses, fuel, voyage costs, direct vessels expenses, and depreciation and amortization was P1.5 billion ($33.2 million), higher by P69.3 million ($1.5 million) or almost 5% from the P1.4 billion ($31 million) in 2013.

The increase was mainly due to increases in fuel costs by almost P58 million ($1.3 million); cranage expenses of P50.1 million ($1.1 million) and storage charges by P19.2 million ($425,574), offset by slight decreases in direct vessels and terminal expenses.

Gross profit, the difference between freight revenue and direct cost, went up by 58.1% to P293 million ($6.49 million) from P185 million ($4.1 million) in 2013.

LSC registered earnings before interest, taxes, depreciation, and amortization (EBITDA) at P393.4 million ($8.7 million), 12.6% higher than its 2013 EBITDA of P349.3 million ($7.7 million).

As to LSC’s balance sheet, total assets by end-2014 stood at P3.2 billion ($70.9 million), higher by 9.6% from P2.9 billion ($64.2 million) from the previous year, substantially due to increases in trade and other receivables.

Capital expenditure

Umali said that LSC spent P306 million ($6.7 million) in capital expenditure, and added that these funds came mainly from bank loans and internally generated funds.

For fiscal year 2015, LSC plans to spend P600 million ($13.2 million) to be used mainly for the acquisition of a new vessel, as well as a container yard in Bacolod, said LSC operations planning manager Celeste Villa-Real.

Also included in the budget plan is the acquisition of forklifts and allocation for leasing of other equipment. – Rappler.com

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