Ocean Wilsons Holdings Ld - Quarterly Update

Our Operations

Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Group") is a Bermudian investment holding company which holds a portfolio of international investments, and through its subsidiary, Wilson Sons Limited, controls a maritime services and logistics company in Brazil.

Financial Results

Group revenue for the three months ended 31 March 2019 was 16% lower at US$100.5 million (2018: US$119.3 million). Port terminal and logistics revenue decreased 10% to US$60.3 million (2018: US$67.1 million) principally due to a higher average USD/BRL exchange rate in the period used to convert revenue into our reporting currency. The average USD/BRL exchange rate in the period at 3.77 was 16% higher than the comparative period in 2018 at 3.24. Container volumes in the period were 2% lower at 244,100 TEUs (2018: 248,200 TEUs). Towage and ship agency revenue for the quarter was 15% lower at US$38.6 million (2018: US$45.6 million) as stronger competition in harbour towage continued to impact volumes and pricing. Harbour towage manoeuvres decreased 8% to 12,926 (2018: 14,013). Shipyard revenue fell US$5.1 million to US$1.6 million (2018: US$6.7 million) reflecting the decrease in third-party shipbuilding and dry-docking operations.

 

IFRS 16

 

On 1 January 2019 the Group applied the new accounting standard, IFRS16 - leases for the first time using the modified retrospective approach. As a result, the Group recognised a right-of-use asset and a lease liability at present value of US$176.3 million.  The impact was principally due to the recognition of right-of-use assets previously recognised as operating leases. Wilson Sons Limited's ("Wilson Sons") EBITDA for the first quarter benefited by US$5.5million due to the application of the new standard while profit for the period was negatively impacted by US$1.0million. Comparatives for the 2018 financial period were not restated.

 

Wilson Sons EBITDA for the first quarter at US$37.3 million was 10% lower than 2018 (US$41.4 million). Adjusting for the effects of IFRS 16, Wilson Sons EBITDA in the first quarter would have been 23% lower than prior year at US$31.8 million. The decrease in EBITDA is largely due to lower revenue and higher payroll tax costs as a result of the rollback in 2018 of temporary payroll tax exemptions granted to some business sectors in Brazil.

 

Wilson Sons profit after tax for the first quarter of US$6.4 million was US$8.9 million lower than the comparative period in 2018 (US$15.3 million).

 

The CEO of Wilson Sons Limited operations in Brazil, Cezar Baião, stated:

 

"Wilson Sons 1Q19 EBITDA of US$37.3 million was down 9.8% against 1Q18 (US$41.4 million) largely due to a decrease in towage results. Excluding the aforementioned IFRS16 effects, 1Q19 EBITDA would have been US$31.8 million.

Container terminal results declined as economic growth in Brazil remains sluggish. Operating volumes at Salvador were supported by solid expansion in cabotage flows. Civil works continued on the Salvador terminal to extend the principal quay from 377 metres to 800 metres, which will allow the simultaneous berthing of two super-post-Panamax ships. The Rio Grande terminal reported weaker volumes affected by reduced trans-shipment cargo with the loss of two services. In the medium term, the dredging of the Santos port channel will allow carriers to deploy larger vessels favouring trans-shipment in Rio Grande, given the draft constraints at Argentinian and Uruguayan ports.

Towage results continued to be pressured by a very competitive environment affecting volumes and prices. In 1Q19 the division signed a long-term contract to provide towage services for an LNG terminal in the Port of Sergipe.

Offshore support vessel ("OSV") results were negatively affected with the end of eight long-term contracts in 2018. The Brazilian offshore oil and gas market is expected to face another difficult year with demand for OSV hire remaining soft, although we continue to explore alternative revenue streams for our off-hire vessels.

The Group remains focused on increasing cash flow and improving capacity utilisation across all businesses in order to maximise stakeholder value, maintaining our relentless commitment to safety, with no lost-time injuries recorded in the quarter."

Investment Portfolio

At 30 April 2019, the investment portfolio including cash under management amounted to US$276.3 million (31 December 2018: US$258.9 million). The investment portfolio represents US$7.81 (£6.01) per Ocean Wilsons share.