Westports expects growth to return in second half

KUALA LUMPUR:Westports Holdings Bhd expects growth to return in the second half of the year after normalisation of the realignment in shipping alliances.

“What we expect to have this year is slight modest growth of low single-digit for 2018. We expect to see a slight decline in the first quarter and to be flat in the second quarter before we start growing again strongly in the third and fourth quarters,” said its group managing director Datuk Ruben Emir Gnanalingam.

Speaking to reporters at its AGM today, he said the impact from the realignment of shipping alliances, which happened in April last year, would last for about 15 months after which there would likely be growth.

“These alliances are what caused the readjustment to the market. I think the market has now readjusted to a new base and we will continue to see growth coming from that point onwards.

“The one-off adjustment should be completed by end of the first half of this year,” he said.

Ruben said 2018 will be a typical year for Westports, unless the trade friction between the US and China escalates into a trade war.

“Worldwide cargo will be affected and we will be affected too. If that happens, we may not hit our targets,” he added.

Despite the projected improvement in the second half of the year, the group does not expect to achieve another record year this year.

“2016 was the highest volume growth we had, we don’t expect this year to be higher than that. But with regards to revenue, it’s hard to tell because we’re growing a lot in terms of local cargo, which is higher margin but volume wise we don’t expect it to be higher. Profit after tax-wise, definitely we don’t expect it to be a higher year because the tax rate is going back to 24%.”

Westports handled nine million twenty foot equivalent units (TEUs) in financial year ended Dec 31, 2017 and reported its highest revenue ever of RM2.1 billion. Operational revenue stood at RM1.7 billion.

Its net profit also hit a record of RM652 million due to its highest level of capital expenditure of RM812 million (for expansion of container terminal CT8 and CT9) and Investment Tax Allowance incentive (4% tax rate).

On the expansion of its container terminal facilities from CT10 to CT19, Ruben said it may invest RM10 billion to RM15 billion over 20 years.

The group is currently conducting studies on the expansion, which will double its capacity from 16 million TEUs to about 30 million TEUs.

Westports has already obtained approval in principal from the government and expects to kick start the expansion in two years’ time.