Struggling 2GO banking on modernization to return to profit; no fund-raising plans
2GO GROUP, Inc. has no plans to raise additional capital this year to fund its modernization projects, which are expected to help the company get back on track to profitability, a company official said.
“[The] management continues to invest in modernizing 2GO. During 2020, management began implementing new software and automation systems to improve customers’ ordering and delivery experience as well as the company’s operating efficiencies. These systems go live in 2021,” William Charles Howell, 2GO chief financial officer, was quoted as saying in the minutes of the company’s 2021 annual stockholders’ meeting held on Friday last week. The document is available on 2GO’s website.
Mr. Howell also said the company continues to invest in the modernization of its shipping fleet and equipment.
“These investments will lead to improved customer service and a reduction in costs which in turn will help the company on its way to profitability. At this time, management is able to fund these investments internally thus have no current plans to raise additional capital,” he said.
The company began the implementation of its three-year modernization program in mid-2019, according to 2GO Chief Operating Officer Waldo C. Basilla.
“The process is ongoing. It includes rationalization and optimization of the company’s assets, organization and network,” Mr. Basilla was quoted as saying in the minutes of the annual meeting.
“Among many things management has accomplished to date, this process has allowed them to right-size the shipping fleet, warehouse, facility footprint and organization. These efforts have significantly improved their cost base and will allow them to compete aggressively immediately,” he added.
The company plans to deploy new ships, which are designed to consume less fuel and should support the company’s sustainability vision, in the first half of 2021, according to Mr. Basilla.
“In the first quarter of 2021, management implemented an internationally recognized transport management system that not only optimizes routings and lower cost, but more importantly improves customer experience,” the official was also quoted as saying.
“With all the technology improvements, 2GO now has the capability to do data visualization and data analytics that will ultimately help improve customers supply chain structures,” he added.
On Thursday last week, 2GO reported an attributable net loss of P1.84 billion for 2020, significantly wider compared with the previous year’s loss of P890.35 million.
Revenues fell 18.7% to P17.41 billion from P21.41 billion previously. Freight revenue decreased 9.97% to P3.03 billion, travel revenue dropped 77.57% to P839.14 million, revenue from logistics and other services fell 13.14% to P5.83 billion, while the goods segment saw a 1.55% growth to P7.72 billion.
Cost of services and goods sold declined 14.24% to P16.86 billion.
2GO said its EBITDA (earnings before interest, taxes, depreciation, and amortization) and EBITDA margin remained positive at P439 million and 3% in 2020 and P1.9 billion and 9% in 2019. Its total liabilities to total equity ratio was 7.9 in 2020, up from 3.6 in 2019.
2GO Group President and Chief Executive Officer Frederic C. Dybuncio said, “The pandemic depressed consumer confidence and demand, which in turn weakened the business volumes overall, affecting all our businesses.”
On March 19, Davao-based businessman Dennis A. Uy’s Chelsea Logistics and Infrastructure Holdings Corp. announced that it was selling its entire stake, around 31.73%, in affiliate 2GO to SM Investments Corp. (SMIC) at P8.50 per share.
Chelsea said proceeds from the sale will be used to repay the loan that it obtained to secure the majority stake in 2GO in 2017.
The company expects to complete the disposal within 90 days from signing of the agreement.
Chelsea President and Chief Executive Officer Chryss Alfonsus V. Damuy said in a statement that the divestment will help the company recover from the pandemic crisis because it will no longer be affected by 2GO’s losses.
Chelsea has reported an attributable net loss of P3.31 billion for 2020, compared with a loss of P831.76 million a year earlier.
2GO Group shares closed 1.41% lower at P8.38 apiece on Friday.