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Ocean Wilsons Holdings Limited - Quarterly Update


Ocean Wilsons Holdings Limited

Quarterly Update

Ocean Wilsons Holdings Limited (LSE: OCN) today announces its third quarter update for 2019. 

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 ("Wilson Sons"), controls a maritime services and logistics company in Brazil. 

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 a 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. Due to the application of the new standard, Wilson Sons EBITDA for the third quarter benefited by US$5.2 million while profit for the period was negatively impacted by US$1.0 million. Comparatives for the 2018 financial period were not restated.

Financial Results

Group revenue for the three months ended 30 September 2019, at US$106.1 million, was 7% lower than the comparative period (2018: US$114.1 million) principally due to reduced revenue at container terminals, lower logistics revenue due to the completion of a specific high-volume contract, and lower shipyard revenues.

Container terminal revenue for the quarter was 8% lower than the prior year at US$44.5 million (2018: US$48.3 million) mainly due to reduced import warehousing revenue. Container volumes in the period were 12% lower at 275,900 TEUs (2018: 312,300 TEUs) principally due to less transhipment volume resulting from the cancellation of two feeder services from Argentina in the first half of 2019. Excluding transhipment and shifting movements, container volumes in the period were 2% lower at 253,100 TEU's compared with 257,800 TEU's in 2018. Towage revenue at US$42.8 million was US$1.9 million higher than the third quarter of 2018 (US$40.9 million) with higher revenue per manoeuvre offsetting lower harbour towage volumes. Harbour towage manoeuvres decreased 2% to 13,724 (2018: 13,992). Shipyard revenue of US$0.9 million was US$2.3 million lower than the third quarter of 2018 (US$3.2 million) reflecting the decrease in third-party shipbuilding and dry-docking operations. Group revenue for the nine months ended 30 September 2019 was 12.6% lower at US$305.3 million (2018: US$349.1 million).

Wilson Sons EBITDA for the third quarter, at US$45.7 million, was in line with the prior year (2018: US$45.8 million) and for the nine months ended 30 September 2019 was 5.9% lower at US$116.4 million (2018: US$123.7 million). Adjusting for the effects of IFRS 16, Wilson Sons EBITDA in the third quarter would have been 11.6% lower than prior year at US$40.5 million and 18.8% lower for the nine months ended 30 September 2019 at US$100.4 million.

Wilson Sons profit after tax for the third quarter of US$13.0 million was US$2.5 million lower than the comparative period in 2018 (US$15.5 million) and for the nine months ended 30 September 2019 was US$3.9 million lower at US$26.1 million (2018: US$30.0 million). Adjusting for the effects of IFRS 16, Wilson Sons profit after tax in the third quarter would have been US$1.5 million lower than prior year at US$14.0 million and US$0.8 million lower for the nine months ended 30 September 2019 at US$29.2 million.

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

  • Wilson Sons reports 3Q19 EBITDA of US$45.7M, a 0.2% decrease from 3Q18, while the adjusted EBITDA (ex-IFRS16) was down 11.6%.
  • Container terminal volumes were impacted by lower transshipment in Rio Grande.
  • Towage volumes remained constrained by intense market competition and temporary reduction in iron ore exports, while prices have begun to stabilize.
  • Adoption of the new IFRS16 accounting standard for the 3Q19 has resulted in a US$5.2M increase in EBITDA but a US$1.0M reduction in profit after tax.

Wilson Sons 3Q19 EBITDA of US$45.7 million decreased slightly against 3Q18 (US$45.8 million) largely due to reduced import warehousing revenue for container terminals. Excluding the IFRS16 effects 3Q19 EBITDA would have been US$40.5 million, 11.6% lower than the comparative period.

Container terminal results declined as economic growth in Brazil remains sluggish. The Salvador terminal reported a 6.3% decrease in operating volumes due to a weak local economy, though 20.4% growth in import volumes led to a better cargo mix (with solar panel volumes performing well). Civil works on the Salvador terminal to extend the principal quay are 60% completed and when finished, will allow the simultaneous berthing of two super-post-Panamax ships, facilitating access to the port and the largest economy in the north-east of Brazil. The expansion project is a priority investment of the federal government's Investment Partnership Program and is critical to the economy of the state of Bahia. The Rio Grande terminal reported weaker volumes affected by reduced transshipment cargo with the loss of two feeder services in 1Q19.

Towage results continued to feel the temporary reduction of iron ore exports and a very competitive environment affecting volumes. After quarter end the division signed a R$42.6 million financing agreement to be used for dry-docking, repair and maintenance of 34 tugboats between 2019 and 2020.

Our oil services businesses including support bases and offshore support vessels ("OSV") still face a weak demand, although we expect a recovery in the medium term. We continue to explore alternative revenue streams for our off-hire vessels and base areas, which are well positioned to profit from the expected recovery in the industry over the next couple of years. In September, the OSV unit signed a new short-term contract with Seaseep for PSV Biguá.

The Company 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.

Investment Portfolio

At 31 October 2019, the investment portfolio including cash under management amounted to US$277.5. million (30 June 2019: US$278.4 million). The investment portfolio represents US$7.85. (£6.08) per Ocean Wilsons share.