Possible decline in Westport’s 2Q transhipment volume
We would like to disclose that for the month of April 2017 to May 2017, the group had recorded lower volume than originally expected.
KUCHING: Analysts are generally surprised with Westports Holdings Bhd’s (Westports) April-May sharp decline in container volume, with some projecting that a decline in the second quarter of financial year 2017 (2QFY17) transhipment volume is likely.
In a filing on Bursa Malaysia, Westports reported that the group achieved one per cent growth in container volume to 2.4 million twenty-foot equivalent units (TEUs) for the first quarter ended March 31, 2017.
In the same quarterly financial report, Westports had indicated in the ‘Current Year’s Prospects’ that the group targets to maintain similar container throughput as that achieved in 2016.
“We would like to disclose that for the month of April 2017 to May 2017, the group had recorded lower volume than originally expected.
“Westports handled 3.95 million twenty-foot equivalent units (TEUs) for the five-month period ending in May, which is lower by three per cent when compared to the corresponding period last year.
“Please also note that the corresponding quarter last year was a record quarter and the fastest growing period for us in 2016,” the group said.
According to Affin Hwang Investment Bank Bhd (Affin Hwang), stripping out the one per cent year on year (y- o-y) uptick
Westports
recorded in 1Q17, container volume fell a greater nine per cent y-o-y for the month of April and May 2017.
“The sharp decline in container volume surprised as we had earlier anticipated moderate growth on higher ad hoc calls arising from the shipping alliance realignment,” Affin Hwang said.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) assessed that transhipment volume could have fallen between 10 per cent and 11 per cent during that period, possibly leading to a three per cent y-o-y decline in the first half of FY17 (1HFY17) overall container volume, a negative surprise.
“Initial forecasts suggested 2QFY17 as being a quarter where Westports could capitalise on adhoc calls to register a growth in volume, following the formation of the new shipping alliances.
“This has not panned out as earlier envisaged, as there was strong competition in the form of hefty discounts from Chinese ports, who vied for the same adhoc containers,” MIDF Research said.
“Exacerbating matters, the majority of calls allocated to Westports by the Ocean Alliance are Eastbound backhaul voyages.
“This caused a void in vessel calls in April, as the new alliance’s container vessels had only begun sailing West-bound to complete the western legs of their voyages.”
On the bright side, the gateway cargo segment could have grown at a stronger pace, which MIDF Research estimated at four to five per cent in April and May, partially cushioning the blow from the drop in transhipment cargo.
This provides some relief as yields for gateway cargo are significantly higher than that of transhipment, a premium which the research arm estimated at 75 per cent.
“Gateway boxes are generally higher margin-yielding, and thus we should see some mild improvement in the gross profit margin, but this should still be unlikely to offset the decline in transhipment volume,” Affin Hwang said.
All in all, Affin Hwang trimmed its container volume growth assumption from two per cent growth to a three per cent decline for FY17.
The research firm also expected FY18 container volume to dip a further four per cent, before rebounding to three per cent growth in FY19.