Port giant ICTSI posts record first-half revenue despite geopolitical and trade uncertainty

Gross revenues from ICTSI’s Americas operations grew 39.1%, surpassing even the Asia segment as the largest revenue contributor

MANILA, Philippines – Port operator International Container Terminal Services, Incorporated (ICTSI) ended the first half of 2024 with a bang, increasing its net income by 34% despite ongoing geopolitical uncertainty that could impact the global trade network it facilitates.

ICTSI reported net income attributable to shareholders of $420.55 million from January to June 2024, up 34% from the $313.80 million earned during the same period last year. Port revenue also rose 13% to $1.32 billion, while earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 19% to $864.99 million.

ICTSI also noted that net income attributable to shareholders included one-time income from the settlement of legal claims in ICTSI Oregon, for which the company received $20.5 million in March 2024; and the deconsolidation of its Indonesian subsidiary, PT PBM Olah Jasa Andal, which resulted in a net loss of $1.6 million. Excluding these factors, its recurring net income would have been $401.69 million, an increase of 24%.

The company attributed the increase in its net profit to “higher operating income, partially offset by an increase in interest on loans and lease liabilities related to concession renewals.”

“We delivered solid results in the first half of the year, once again demonstrating the strength of ICTSI’s diversified international portfolio and the continued execution of our strategic initiatives,” ICTSI President and Chairman Enrique Razon Jr. said in a stock exchange release on Monday, August 12.

Although booming global trade has made him the Philippines’ second-richest billionaire port and casino owner, Razon keeps a watchful eye on geopolitical conflicts that could disrupt the trade network on which his business empire relies.

“While we continue to remain vigilant in the face of economic and geopolitical uncertainties, we have a proven and sustainable growth strategy that gives us confidence in our prospects and continued ability to generate value for all of our stakeholders,” Razon said on Monday.

In notes to ICTSI’s second-quarter financial report, the company cited the Russia-Ukraine and Israel-Hamas conflicts as two events that could “disrupt business and institutional activities and pose a risk to global trade and the economy in general,” although it added that these events had “not had a material impact on the Group’s operations” to date.

“The scale and duration of these events and developments remain uncertain… The overall impact of the short-term and long-term effects of the wars cannot be estimated. The Group will continue to closely monitor the development of these situations,” the company said in its quarterly report.

Closer to home, there is also concern about rising tensions between the Philippines and China in the West Philippine Sea. If a conflict were to break out, it would almost certainly destroy the deep economic ties between the two countries, given that China is the Philippines’ top trading partner. ICTSI operates one port in Shandong, China, through its subsidiary Yantai International Container Terminals.

Strong revenue growth in America

ICTSI operates across six continents, providing a buffer against local disruptions and challenges in specific regions. Approximately 50% of its consolidated cargo volume comes from terminals in the Americas and EMEA regions.

Volumes in both regions declined in the first half of 2024, with volumes in the Americas down 3.2% while volumes in the EMEA region fell 10.6%, mainly due to the expiration of a concession agreement at a port in Pakistan. However, ICTSI ended the half with a marginal increase of 0.6% due to a 7.1% increase in volumes from the Asian segment.

But consolidated volumes don’t tell the whole story. While volumes in the Americas fell, gross port revenues in the region rose 39.1% to $539.4 million in the first half of 2024 from $387.9 million a year earlier. The port operator attributed this primarily to “higher ancillary revenues, tariff adjustments and volume growth with a favorable container mix primarily in (subsidiaries) CMSA, ICTSI Rio and TSSA; and a favorable net impact on the translation of foreign-denominated revenues against the U.S. dollar.”

This means that ICTSI’s US port operations accounted for the largest share of the company’s total revenue from this sector in the first half of the year, even outpacing the $536.9 million in revenue generated from its Asia operations.

ICTSI continues to invest heavily to expand its operations, with capital expenditures reaching US$185.72 million in the first half of 2024. The Company is continuing to expand in key markets such as Mexico, Brazil, the Philippines, the Democratic Republic of Congo and Indonesia.

“We have a strong balance sheet and strong cash generation, with free cash flow up 24% to $602 million, meaning we have significant investment potential for future growth,” port magnate Razon said. – Rappler.com