2GO Group, Inc. reported a 51% decline in net income for the first nine months of 2017 due to an increase in fuel prices and to non-recurring restatement adjustments.
Net income from January to September 2017 reached P75.8 million, lower than the P467 million earned in the same period last year, the group disclosed to the Philippine Stock Exchange. The decline, 2GO said, was due to the recognition of non-recurring restatement adjustments in provision for bad debts and inventory and related party adjustments totalling P207.2 million, and to the increase in fuel prices.
Excluding the non-recurring restatement adjustments, net income would have been P282.9 million, 2GO noted.
Total costs and expenses increased 20% owing to rising fuel prices, which increased 40% from the same period last year. 2GO said all other costs and expenses were generally kept down through improvements in inefficiencies and stringent cost management.
Consolidated revenues increased 15% to P16.7 billion in the first nine months of 2017 from P14.5 billion in the same period in 2016. The non-shipping business, which consists largely of logistics and supply chain, grew by 25% on the back of various service upgrade initiatives and deliberate focus on the growth of key domestic and international accounts.
The growth in revenues was led by 2GO’s distribution business, whose revenue increased by 67% after gaining two new major principals during the second quarter of the year. Similarly, the e-commerce business posted a 66% jump in revenues.
With the strong growth of the non-shipping business, the revenue mix for the group further pushes towards non-shipping, which now accounts for 61% of the total turnover.
Shipping revenues
Shipping revenues, meanwhile, improved by 3% mainly due to higher volume. Freight revenues, however, decreased by 4% despite the increase in volume by about 1,500 twenty-foot equivalent units (TEUs). 2GO said ships were affected by berthing congestions in five major ports they call. Freight was also negatively affected by an overcapacity in the freighter market as the entry of new players in a span of two years intensified competition and pushed rates down. On the other hand, passenger volume increased by more than 48,000 passengers for long-haul trips and more than 84,000 for short haul, yielding a 10% hike in passenger revenues.
2GO’s new management recently realigned and strengthened the business model of the company, concentrating on three primary business units: shipping, logistics, and distribution. SM Investments Corporation and Udenna Corporation acquired shares in 2GO’s parent company, Negros Navigation Co., Inc. early this year, bringing in a change in management and key officers.
“There is now more focus on solidifying its core businesses, but ably supported by the auxiliary sections within the group. With this in place, the company is on its way to further increase its revenues and improve the operational performance of its various companies, as well as enhance its service levels,” the group said.
It added that the new management is currently applying best practices from its new stakeholders, “which is expected to lead to efficiencies and cost benefits to the whole 2GO Group.”
2GO and its subsidiaries offer a full range of capabilities and services including warehousing, inventory management, domestic and international express mail and courier services, sales distribution and merchandising, domestic freight services for full/less container load shipments, Isotank, reefer and cold chain services, heavy lift and project logistics, regular liner passenger service, corporate/leisure travel and package tours, and international freight forwarding and brokerage.
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