Publicly-listed Asian Terminals Inc. (ATI) is accelerating its investment program for Manila South Harbor to the tune of over P6.0 billion during the next three years, further boosting the capacity and efficiency at the gateway port.
In an exclusive interview with PortCalls, ATI executive vice president Andrew Hoad said the company saw wisdom in increasing its capital expenditures in preparation for future growth and in line with the country’s expanding economy.
“This is by far the most aggressive investment program of ATI in over two decades and we are very eager to see this transformation materialize soon,” he said, noting that this would improve efficiencies and hasten transactions for the greater benefit of port users and ultimately consumers.
“A growing economy needs a sustainable gateway that has room for growth and expansion, hence we are fast-tracking and increasing our capital outlay for Manila South Harbor to cope with such growth ahead,” the ATI executive said.
Sourced from internal funds, ATI’s investments will bankroll its continuing container yard expansion projects within the 80-hectare Manila South Harbor expanded port zone and the acquisition of more modern container handling equipment, among others.
Last year alone, ATI initially spent P1.8 billion in capital investment. Part of this is the two brand new rubber-tired gantry cranes (RTGs) it took delivery early in November to beef up South Harbor’s cargo-handling fleet. The rehabilitation of Pier 3 at South Harbor is also near completion, and it has since been outfitted with extended crane rails and expanded back-up container storage areas within the pier enabling Manila South Harbor to accommodate more and bigger ships.
More operation-critical port equipment are scheduled to arrive early in 2014, including a high-capacity ship-to-shore crane, six additional RTGs, eight additional empty container handlers and 12 additional internal transfer vehicles.
3rd quarter 2013 results
Meanwhile, for the first nine months of 2013, ATI posted P4.0 billion in revenues year-on-year, 4% above the same period last year, which Hoad attributed to favorable unit rates in international operations at South Harbor and higher volume of domestic containers, passengers and roll-on-roll-off vehicles at the Batangas Port.
The port operator’s income stood at P844 million, 31.8% lower compared to the same period in 2012, on account of the impact of a change in accounting policy in relation to fixed concession fees with the port authority. Excluding the technicality of the change in accounting policy, the business measured on a like-for like basis would have seen earnings go up from last year by 1.5% to over P1.2 billion. “This is especially pleasing”, commented Hoad, “because 2013 has seen a very significant increase in our overheads as fixed concession royalty fee increases of over 40% kicked in this year as part of the agreement some years back to extend the ATI concession. So we have been able to avoid a backwards step in earnings while delivering the extended concession period so necessary to allow the large-scale investment which will deliver service sustainability for the port.”
The company’s international container shipping business has, however, seen slower-than-expected growth, mirroring developments at the Port of Manila (POM). Box throughput at POM was up 3.3% from January to end-October in contrast to the 6.6% growth recorded for the full-year 2012.
“So here’s a story where the main division container growth was a little bit below last year but through efficiency and management we’ve managed to squeeze out what we need for the bottom-line.” This is also where the synergy and diversity of ATI comes into full spectrum with ATI’s other business units contributing significantly. “Our domestic, general stevedoring operations, as well as Batangas are doing well this year, with general stevedoring 30% up on last year – perhaps that tells us something about the nature of economic growth at the moment, with bulk general stevedoring up but containers slow,” Hoad said.
“For now the growth is a little sluggish but we still think we’ll have a decent full-year performance as a result of cost controls, mainly through judicious deployment of the workforce and the right yard strategy.”
Early on, efficiencies were created following a review of the South Harbor yard plan in February 2013. Because of this, ATI is now doing on average two moves an hour more per crane than it did in 2012, Hoad said. “Two moves an hour doesn’t sound much, but let’s say you’ve got three cranes, that’s six moves an hour, we’ve got 1,000 moves. That’s the difference between handling a ship in 12 hours rather than 13. That’s an hour of saved fuel at sea which is thousands and thousands of dollars for shipping lines.”
Hoad noted productivity in the last six to seven years at the South Harbor has improved greatly. “Go back ten years, we were doing 18 moves an hour. Now we can at least do 26 and for quite a few shifts we hit 30.”
Another significant area for improvement is South Harbor’s yard footprint capacity. Between December 2011 and December 2014, ATI is looking at boosting such capacity by 55%.
“However good your yard planning, you do need a sufficiently large amount of space. So we’re converting pieces of land within the South Harbor area traditionally being used for other functions, such as general stevedoring or domestic shipping, and taking over some blocks of land where there have been warehousing and other businesses used for other functions.”
This need for space came into focus during last year’s peak season when 3,000 containers with National Food Authority rice were stored at the South Harbor, accounting for 20% of static yard capacity. The containers stayed an average of 42 days. That compares with the average import dwell time of six days during the course of the year. As a result, productivity during that period dropped.
“Once the yard gets full it’s not just that you have to dig the boxes to deliver them on the landside for the consignees, but it affects the ships as well because the same stacks, the same yard is serving ships. So potentially abuse of a port, using it is a storage area and not as a transit area, can be detrimental to both the ships and to the importer,” Hoad said.
He likened the situation to that of an airport that keeps letting airplanes land and discharging passengers but locking the doors so no one can leave the terminal. “To use the airport analogy, there has to be a reasonable flow; it’s a transit area and not a storage area. That’s the biggest challenge and ultimately it’s about lack of competitively priced storage space in Metro Manila.”
Beyond port operations, Hoad is also busy pushing ATI’s corporate responsibility agenda.
“We are very genuine when we say that it’s important to do something about the community,” he said. “There’s such a thing as a port community, which is not only the people who work at the docks, the truckers, the port authorities and all the people who live around the ports, but also including the informal settlers who live around the ports.”
The recent devastation brought by supertyphoon Haiyan (local name Yolanda) was a case in point. ATI quickly responded to the disaster by offering its Manila and Batangas ports as staging points for government relief efforts. ATI has dedicated a 1,000-square meter warehouse at South Harbor for this purpose and also deployed labor, equipment and trucks to augment government resources in shuttling supplies from packing centers to South Harbor. ATI earlier waived port-related charges for its domestic shipping line customers and government-owned ships doing relief-related work via its facilities.
With the help of volunteer servicemen and its own dockworkers, around 160 containers have been sent out to Visayas aboard vessels of ATI’s domestic shipping line customers.
Above this, ATI also donated through the Philippine Red Cross from both corporate funds and those generously contributed by ATI staff.
ATI’s strategic foreign partner, DP World, is also rallying up international support for the Philippines though its vast port network. DP World is working closely with the Red Crescent and other international aid organizations.
Over the long-term, ATI, in partnership with STI, has also committed to support the rehabilitation of school facilities destroyed in Tacloban City and other affected areas in the Visayas.
“We always try to give something back directly and indirectly. Giving back means ATI budgeting US$500,000 a year for its corporate social responsibility programs such as supporting the high school and university education of 109 children; tree planting; back-to-school programs; and donations for calamity victims,” Hoad said.
In addition, ATI employees participate in clean-up drives a couple of times a year to clear the coast of Manila Bay of rubbish and other flotsam. The last coastal cleanup cleared 15 truckloads of garbage, Hoad said. “To further be environment-friendly, ATI recycles its wastewater. We try and be corporately responsible in terms of the local community, people who work for us and the environment,” he said.
Indirectly, ATI supports government projects in Manila by paying taxes religiously. For the last five years, the port operator has been Manila’s top taxpayer in terms of real property and is also among the top 10 payers of the corporation tax.