By Ken Nagy, CFA
On July 26, 2012 Grupo TMM (OTC Markets:GTMAY) released results for its second quarter and six months ended June 30, 2012. The Company reported mixed results for the quarter due to lower tariffs and lower utilization at the product tanker segment, reduced operations at Acapulco and the volatility of the peso versus the dollar.
The Company’s second quarter performance resulted in a 12.8 percent year over year decrease in consolidated revenue, with revenue dropping $8.9 million to $60.7 million from $69.6 million for the three months ended June 30, 2011. For the six months, consolidated revenues fell $11.8 million or 8.7 percent year over year to $123.8 million.
Maritime segment revenue fell $3.6 million or 8.5 percent year over year to $39.9 million for the three months. For the first half of fiscal 2012, Maritime revenue fell 2.3 percent year over year to $81.3 million. The decrease in Maritime revenue was a result of losses at product tankers due to increased offshore days, as well as by lower average daily tariffs which were partially offset by the Company's shipyard at Tampico.
Despite the Maritime segment being impacted by the difficult economic marketplace, the offshore business revenue improved 0.4 % to $50.3 million during the first six months of fiscal 2012 as a result of increased revenue days.
Detailing the rest of the Maritime segment revenue for the first half of 2012 more in depth, product tanker revenue was $13.9 million, chemical tanker revenue was $8.0 million, harbor tugs revenue increased 7.5 percent to $7.2 million and Shipyard revenue was $1.8 million.
The increase in harbor tugs revenue was due to higher tariffs per ship call and the addition of tug services to a new Liquefied Natural Gas, or LNG, terminal at Manzanillo in March.
Utilization at the offshore segment continued its strength at 88.5 percent for the second quarter and 90.4 percent for the first six months of 2012, up from 80.9 percent for the comparable period of 2011.
Furthermore, the Company reported that during the first six months of 2012, it renewed six contracts for three-year terms each, and in July it renewed two contracts for two-year terms each, all of which will improve Maritime division results going forward.
Likewise, the Maritime division has a current backlog of $167.6 million.
The Company had $70.1 million of cash and cash equivalents and working capital of $30.8 million at the end of the second quarter.
As of June 30, 2012, Grupo TMM’s total debt was $784.5 million compared to $752.5 million as of December 31, 2011. However, it should be noted that the book value of the Company's Trust Certificates debt increased $30.0 million from December 31, 2011, as a result of a 3.9 percent appreciation of the peso against the dollar in the first six months of 2012. Still, on February 15, 2012, the Company paid approximately $30.4 million of its Trust Certificates debt, including a capital prepayment of $1.2 million.
Grupo TMM also continues to work on the development of a container and liquids terminal at the Port of Tuxpan and expects to reach an agreement in the short-term. Additionally, TMM continues to work to expand the Company’s revenue and profit base through the addition of specialized offshore vessels to its fleet.
Similarly, in January 2012 TMM acquired a shipyard at the Port of Tampico, which contributed to Maritime's revenue and profit and is expected to increase its revenues in the second half of 2012. Management expects to have the necessary capabilities to build vessels at this facility in the short-term, which is in line with PEMEX's intention to add 32 offshore vessels to its fleet, of which 21 are required to be Mexican built vessels.
A Closer Look at the TMM’s Growth Plan.
The firm’s five-year growth plan includes two projects.
The first project consists of the development of a container and liquids terminal at the Port of Tuxpan, Veracruz. The container terminal will meet increasing demand for capacity in the Gulf of Mexico, taking advantage of organic growth in the Mexican market. The liquids terminal will address current and projected increased demand for imported gasoline and diesel fuel through the construction of a pipeline and a berthing position.
While development of the facility could take up to two years, management believes it is close to reaching an agreement for the financial implementation of the development of a container and liquids terminal.
Still, when completed, the terminal will strategically position TMM in these lucrative markets.
The second project includes the addition of specialized offshore vessels to TMM’s fleet to meet increased demand for deep water transportation. The Company’s intent is to escalate these services by taking advantage of the Mexican Navigation Law which grants priority to Mexican ship owners performing cabotage (intra-Mexican movement between Ports) in Mexican waters.
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