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Port Authority records $2.23-billion net loss

Published:Wednesday | March 26, 2014 | 12:00 AM
Kingston Container Terminal. - File

McPherse Thompson, Assistant Business Editor

A 13 per cent depreciation in the Jamaican dollar against the United States dollar resulted in a $4.38 billion unrealised exchange loss for the Port Authority of Jamaica during financial year 2012/2013.

The maritime regulatory agency said operating profit of $2.16 billion for the year represented an increase of $880 million or 69 per cent over the $1.28 billion earned the previous year.

However, in its financial review, it said that when adjusted for the unrealised exchange loss of $4.38 billion from the revaluation of long-term loans, there was a net loss of $2.23 billion, compared to a net surplus of $686 million recorded during the previous financial year.

The Port Authority explained said that approximately 97 per cent of its long term loans are denominated in United States dollars.

"Based on International Accounting Standard, the Authority is required to report its foreign-currency loans at the year-end rate," it said.

Noting that the proceeds of the loans were used to acquire the operating assets and for infrastructure development, it said the 13 per cent depreciation in the Jamaican dollar against the US dollar, moving from $87.30 in March 2012 to $98.89, at March 2013, resulted in the $4.38 billion unrealised exchange losses.

However, it said although the exchange losses were significant, more than 90 per cent was unrealised and has no immediate cash flow impact.

The Port Authority said that approximately 80 per cent of its annual income is denominated and collected in United States dollars, while its operating expenses are mainly Jamaican dollar.

"This creates a natural currency hedge in terms of net US (dollar) earnings and cash flow," it said.

Nevertheless, "the management and board of directors, as part of its corporate and strategic focus, have implemented measures to reduce exchange rate exposure. This includes refinancing a portion of the existing USD loans to the JMD equivalent," the Port Authority said.

10 per cent increase

The agency saw its income increased by 10 per cent or $1.33 billion during the review period, moving to $15.22 billion, from $13.89 billion, the previous financial year.

Container-handling revenue accounted for 57 per cent, or $8.71 billion, facility fees 12 per cent or $1.81 billion; equipment and land lease $871 million, or six per cent; and statutory revenue $859 million, or six per cent; according to the financial report.

During the period, expenses totalled $11.25 billion, an increase of $545 million, or five per cent over the $10.7 billion recorded the previous year.

Operating expenses accounted for $9.4 billion of total expenses, the Port Authority said, noting that the increase of $545 million was primarily attributed to salaries and related costs, equipment and infrastructure maintenance, and fuel and electricity.

Earnings before interest, tax and depreciation continued to grow, reflecting a 13 per cent, or $612 million, increase over the previous year.

"This was achieved despite the continued negative impact of the global recession on the Authority's core businesses and high price increases in fuel and electricity costs over the period," said the financial report.

The Port Authority said its asset base during the review period was $51.21 billion, an increase of $919 million over the previous year, and that property, plant and equipment accounted for 68 per cent of total assets.

The agency said it had total liabilities of $40.73 billion, an increase of $3.1 billion over the $37.58 billion in 2012. Of that amount, long-term loans accounted for $37.71 billion, which increased by $3.02 billion, due mainly to the $4.38 billion from unrealised exchange loss.

At financial year end, the Port Authority said it had net current assets of $1.14 billion versus a working capital deficit of $1.58 billion, at March 2012. Cash and short-term deposits were $2.75 billion, an increase of $1.29 billion.

"As required by International Financial Reporting Standards, a chartered valuator undertook the valuation of the Port Authority's investment properties, and a fair value gain of $397 million was recognised in the financial statement," the report said.

The Port Authority said debt continued to be the main source of financing for its capital programmes, evidenced in the value of $37.71 billion long-term loans and $6.13 billion payment for loans and interest cost.

"Management and the Government recognised that in order to continue to maintain financial viability and improve available cash flow to support growth and replacement capital, it will be necessary to pursue alternative sources of funding, other than debt financing, for future capital expansion," it said.

It added that in this regard privatisation of the operations of the Kingston Container Terminal is a high priority and strategic focus for the Government and the Authority's board and management team.

mcpherse.thompson@gleanerjm.com