Amid a contracting global economy, the Philippines remains a bright spot this year, especially with the expected resurgence in the country’s manufacturing industry, according to the head of a global port operator.
At the recent annual stockholders’ meeting of International Container Terminal Services, Inc. (ICTSI), company chairman and president Enrique Razon, Jr. told reporters, “The Philippines remains a bright spot and should have a healthy economic growth this year.”
He pointed out that with the slowdown in China, the Philippines has become a more attractive location to foreign investors, a positive sign for the manufacturing sector.
Razon indicated the ICTSI, which operates 30 terminals in 20 countries, will cut costs, reducing head count in some areas, notably Brazil.
“For Brazil, we don’t see any relief in sight at the moment. They’re going through an impeachment, they have this corruption scandal,” he explained.
Brazil’s president Dilma Rousseff Rousseff could be removed from office within weeks by the Senate in an impeachment process that has paralyzed her government and thrown Brazil into its deepest political crisis since its return to civilian rule in 1985.
Razon expects the slowdown in global trade to continue, even possibly getting worse before it becomes better.
“The world is in the same situation as it was the second half of last year and the outlook is nothing to be excited about,” he said.
With the continuing slowdown in China sending China-reliant countries such as Brazil into deep recession, the spreading conflict in the Middle East, and the terrorist attacks in the West, “you will be hard pressed to be optimistic about the near and medium-term prospects for global growth,” Razon said.
Another challenge, he noted, is that shipping lines, which are ICTSI’s main customers, “are also having a very difficult time” bolstering their revenues, also a direct consequence of slow trade.
He noted there remain bright spots in ICTSI’s portfolio, as it has several “star performers”—such as Honduras, Iraq, Pakistan, and others that “you would not normally expect to be drivers of growth”—helping to propel the company’s performance. Growth is also expected from the group’s new terminals in Congo, Australia, and Colombia.
64% drop in income
ICTSI reported a 64% decline in net income to US$69 million for 2015, down from $192 million in 2014, citing one-time adjustments and non-recurring charges.
Gross revenue from port operations dipped by 1% to $1.05 billion. The port operator traced the decline to an unfavorable container volume mix; lower storage revenues and ancillary services; and the negative impact of foreign exchange translation on its terminals in Recife, Brazil; Toamasina, Madagascar; Manzanillo, Mexico; and various Philippine terminals.
Cargo volumes handled grew 5% year-on-year.
For 2016, the group’s capital expenditure budget is about $420 million, mainly allocated for initial developments at its new container terminals in Congo and Iraq, and for the continuing development of the company’s project in Australia. The 2015 capex was $353.5 million.
