Chairman’s Report at the 2021 ICTSI Annual Stockholders’ Meeting

Fellow stockholders, ladies, and gentlemen. 

As you are all very much aware, 2020 was a year like no other, and the pandemic continues unabated. The positive in this is that vaccines now exist and the sooner the world is vaccinated, the sooner we will get out of the largest global crisis any of us have experienced.

For the majority of 2020, there were lockdowns and disruptions in every country where we operate. When the world started going into lockdown, we expected that there would be an unprecedented contraction in global trade, severe enough to be historical in scale. 

We immediately slashed our capital expenditure program down to the bone and only continued ongoing capex, eliminating everything else. We likewise initiated aggressive cost reductions in light of the weakening demand in many of our terminals. 

To our surprise, once some countries began easing lockdowns, we started seeing month on month recoveries in volume throughout the second half of 2020. We saw the worst of it from April to June. 

ICTSI managed to deliver positive volume growth of 0.2 percent year on year, which is a testament to the strength and resilience of our business.

Business Development

Several of our terminals achieved operational landmarks in the challenging environments. 

Victoria International Container Terminal set a record in the Port of Melbourne, Australia for the highest container exchange in one single call, and was one of the star performers of the year. 

Adriatic Gate Container Terminal handled its 300,000th TEU, while Contecon Manzanillo handled its one millionth TEU.

In July, we signed the concession to develop, operate and manage the Multi-Purpose Terminal of the Port of Kribi in Cameroon. And in October, we started commercial operations. 

Also, in October, Contecon Guayaquil signed an investment contract with the Ecuadorian state to further strengthen and develop the Port of Guayaquil with an investment of USD18 million to boost the port’s capacity to handle neopanamax vessels.

In December, we completed the Manila International Container Terminal’s Berth 7 expansion, effectively raising MICT’s annual capacity to over 3.3 million TEUs.

Group Volume

ICTSI handled consolidated volume of 10,193,384 twenty-foot equivalent units (TEUs) in 2020, marginally higher by 0.2 percent compared to the 10,178,018 TEUs handled in 2019. 

Our new terminal in Rio, Brazil contributed to the increase. Without Rio, volume would have decreased two percent – still a surprisingly positive performance given where we were in the early stages of the pandemic.

Financial Performance

Gross revenues grew by two percent in 2020 to USD1.505 billion compared to the USD1.481 billion in 2019. Excluding the contribution of the new terminals, consolidated gross revenues would have decreased by one percent in 2020. 

Consolidated EBITDA increased six percent to USD876.8 million in 2020, from USD830.1 million, primarily due to lower cash operating expenses resulting from continuous group-wide cost reduction and optimization measures and positive contribution of ICTSI Rio. 

EBITDA margin, on the other hand, increased to 58 percent in 2020, from 56 percent the previous year. Consolidated cash operating expenses in 2020 was two percent lower at USD453.6 million compared to USD464.2 million. The decrease was tapered by the cost contribution of our new terminals in Brazil and Cameroon, and negative translation impact from Philippine Peso based expenses. Without the cost of the new terminals, consolidated cash operating expenses would have decreased by seven percent.

Net income attributable to equity holders was USD101.8 million, one percent higher than the USD100.4 million earned in 2019. Without ICTSI Rio contribution, impairment charges and non-recurring items, net income attributable to equity holders would have increased by nine percent to USD282.1 million. 

Diluted earnings per share declined three percent to USD1.98 cents, from USD2.04 cents in 2019.

Fund Management

As early as March, we decided to drastically cut almost all capital expenditures to the barest minimum, from the original USD270 million capex budget to USD160 million, only enough for projects that were about to be completed and those absolutely necessary. However, our total capex reached USD198.7 million due to the additional capex from the new terminal in Cameroon and the reinstitution of postponed capex in a number of terminals which demonstrated strong volume growth in the second half of 2020.

In June, we issued USD400M in 10-year fixed rate senior unsecured notes to refinance existing short-term loans and for general corporate purposes.

In July, we also issued USD300 million in senior guaranteed perpetual capital securities callable starting May 2026.

The Group’s capital expenditure budget for 2021 is approximately USD250.0 million. This will be used for the completion of the expansion project at the MICT in the Philippines, the ongoing expansion at Matadi Gateway Terminal in the Democratic Republic of Congo, the new expansion project at VICT in Australia, equipment acquisitions and upgrades, and for various maintenance requirements.

Alert and Prepared

The collaboration of ICTSI and Bloomberry is the private sector lead in the procurement of the Moderna COVID-19 vaccines. To date, this is the largest combined National Government, Local Government and private sector order. 

When deliveries arrive at the end of the second quarter, we shall immediately roll out our vaccination program for employees, their direct dependents and extended household members. 

In the meantime, we continue to be alert and prepared to adapt quickly as new information and challenges arise. We are certainly not letting our guard down. 

I thank the men and women of the Group who have remained true and dedicated through this most difficult time. I also thank our shareholders who continue to believe in what we do. 

Thank you.

Enrique K. Razon Jr.
Chairman & President