Port firm’s growth appetite cools
International Container Terminal Services expects to spend only half of the US$530 million ($820 million) it budgeted for this year as the Philippine port operator limits its expansion amid slowing global growth, says chairman and president Enrique Razon.
“The growth picture of the global economy is not . . . great,” Razon said.
The company, known as ICTSI, built a portfolio of sea ports from Manila to Oregon to Ecuador as global trade boomed over the past decade, driven by China’s rapid growth. The trade picture has since dimmed, with the World Trade Organisation recently cutting its forecast for global trade to 2.8 per cent growth this year, from 3.3 per cent previously.
In July, the International Monetary Fund forecast the world economy to grow 3.3 per cent this year, down from 3.4 per cent in 2014.
Philippine Economic Planning Secretary Arsenio Balisacan said last month the nation’s economy could still grow between 6 per cent and 6.5 per cent this year, after it grew 5.6 per cent in the second quarter.
“That kind of growth in the world now is already spectacular,” Razon said. “If the Philippines continues to grow 4 per cent to 6 per cent, our companies should do pretty well.”
ICTSI’s net income in the second quarter fell 6 per cent from a year earlier to US$46.4 million, with the depreciation of the euro and the Brazilian real affecting revenue.
Half of ICTSI’s revenue is in US dollars, giving the company a natural currency hedge, Razon said.
Capital spending in the first half of the year was US$136.7 million, accounting for 26 per cent of its US$530 million annual budget.
Despite the global slowdown, ICTSI’s earnings may rise as new terminals begin operations, Razon said. ICTSI just completed a terminal in Argentina, has projects under way in Colombia, Congo and Australia, and is exploring investment opportunities in Greece and Africa, he said.
Razon, whose net worth was estimated at US$3.7 billion, said he could be interested in airports as well.
“We have to be in a position with enough cash to take advantage of some opportunities, be they distressed or not,” he said. “This is the time to make good moves that will make you a lot of money down the road.”