Philippine carrier Lorenzo Shipping Corporation (LSC) reported a net loss of P67 million for the first quarter of 2016 from a net income of P16 million in the same period last year.
Bigger costs due to high bank loans, settlement of certain tax assessment, and higher cost of services ate into earnings during the first three months of the year, LSC said in a disclosure to the Philippine Stock Exchange.
This despite an increase of 3% in freight revenue to P566 million from P551 million as volumes carried during the period expanded.
The shipping line ended the first quarter with a total volume of 19,950 twenty-foot equivalent units (TEUs) handled, slightly more than 19,417 TEUs in 2015, “despite the overcapacity in the market, aggressive pricing by competitors, and new entrants in the domestic liner market.”
Marketing efforts to recapture lost accounts helped to bring in more cargoes, LSC explained.
A new pricing model was also introduced to maximize vessel load, especially going northbound. The carrier likewise resorted to co-loading with other shipping lines to gain additional cargo volumes which resulted in higher cargo expenses. Total cost of services for the period amounted to P497 million from P425 million in the same period last year, narrowing gross profit margin from 14% in 2015 to 5% in 2016.
Gross profit dropped to P26 million this year from P78 million last year despite the 10% reduction in terminal expenses due to lower costs incurred from the repair and maintenance of container vans and machinery and equipment.
For the whole of 2015, LSC posted a net loss of P231 million from a net income of P44 million in 2014, hampered by fewer vessel trips.
The domestic carrier is embarking on a major turnaround project “in order to address declining profitability and service reliability and increasing costs.”
Strategies include restoring the reliability of LSC’s service by having well-maintained vessels and shore equipment and managing highly motivated sea- and land-based staff.
The firm also plans to optimize the use of vessels on profitable routes, and become more innovative and agile to be more useful to its customers.
Moreover, cost-reduction programs are to be implemented by improving operational and financial processes including cost monitoring and accounting.
Last year, LSC acquired a new vessel, MV Lorcon Iloilo, and a new container yard in Bacolod City, Negros Occidental, and in May 2016, sold Lorcon Cagayan de Oro for US$510,000.
The company owns a fleet of seven cargo vessels ranging in capacity from 200 to 426 twenty-foot equivalent units and deployed in key ports across the country. It also carries rolling cargoes such as heavy equipment, trucks, and vehicles, as well as uncontainerized cargoes such as steel products and bridging materials. Livestock cargoes carried in special vans are also part of its transport services.
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