Kingston Wharves profit grows amid big spend on upgrades
Kingston Wharves Limited (KWL) continues to spend hundreds of millions in preparation for increased shipping activity arising from expansion of the Panama Canal.
At $417 million over six months, capital expenditure on the build out of the Total Logistics Facility essentially matched investments in the project last year when the company spent $437 million.
The ongoing work at the facility bolstered KWL's asset base to $22.1 billion from $20.8 billion a year ago. The project is expected to be finalised in 2017.
Despite the ongoing spend on upgrades, profit at the facility continues to grow. The port company made a net profit of $283.5 million, which was 16.8 per cent higher year-on-year, on revenue of $1.27 billion.
"At the end of the second quarter, the Panama Canal Authority commissioned the expansion of the Panama Canal. This important infrastructure project is expected to bring new opportunities for port operations and logistics services over time to the Caribbean," said a statement signed by Chairman Jeffrey Hall, prefacing the financial results.
"We have sought to develop our facility and make timely investments in cargo-handling equipment and logistics capabilities to allow us to capitalise on these opportunities as they arise and will continue to do so."
The expanded canal, commissioned at the end of June, cost some US$5 billion and took a decade to widen. It can now accommodate much larger vessels that were forced to avoid the canal due to size constraints. KWL wants to provide services to these vessels which pass the Caribbean before entering the canal.
The port company's Total Logistics Facility project is costing US$70 to US$100 million to develop. KWL announced its massive expansion plan in 2014, which is set to double its throughput to one million 20-foot container units.
"KWL is well positioned to build on its platform as the region's leading multi-user and multipurpose terminal," Hall said.
At half-year ending June, Kingston Wharves reported $2.5 billion in revenue and profit of $555 million. The company made $128 million more in profit relative to HY2015; revenue rose 15 per cent.
The segment results reflected increases in both divisions.
"The earnings growth reflects the strong performance in motor vehicles handled," Hall said in reference to the terminal operations division. "This contributed significantly to the division, which grew revenues by 15 per cent," the chairman said.
KWL's overall container volumes were adversely impacted in the quarter by reduced trans-shipment volumes arising as a result of a decision by one of its customers to refocus business away from the provision of feeder services to other lines. Increases in KWL domestic container moves during the quarter were not sufficient to offset reduction in the trans-shipment business.
"We are actively working with our existing customers to attract additional domestic and trans-shipment volumes, while developing business prospects with other containerised carriers and expanding our services across the full range of automotive, bulk and break-bulk cargo types," the port company said.
Profit from terminal operations rose 10 per cent. For logistics and ancillary services, revenue rose 14 per cent, while profit rose 83 per cent.