Drop in cargo volumes cut KWL profits in half

Kingston Wharves Limited (KWL) has blamed the weak state of the Jamaican economy as well as the high cost of electricity for a 47 per cent downturn in after-tax profit, a moderate increase in revenue and flat performance in some areas during the year ending December 2011.

Revenue rose by five per cent to J$3.17 billion, but profits were sliced from J$612 million to J$346 million.

"The result of the group for the 12 months was negatively impacted by declining cargo volumes as a result of the weak state of the Jamaican economy, coupled with rising utility and maintenance costs," said interim chairman and CEO Grantley Stephenson.

He also advised shareholders that KWL conducted an energy audit last year, the recommendations of which, when fully implemented, should assist the company to reduce the cost of electricity.

Revenue declined in the December fourth quarter by five per cent to J$827.19 million, and profits were cut in half from J$241 million to J$122 million.

"During the quarter, the revenue declined as a result of the five per cent fall in the volume of domestic containers processed, 13.52 per cent fall in containers stripped, and a 68.18 per cent fall in cement imported," Stephenson reported.

In addition, he said, the cost of electricity and maintenance was significantly higher than 2010.

Seeking to reduce cost

KWL's subsidiary Harbour Cold Stores saw a 26.28 per cent decline in operating profit for the year, moving down to J$51.72 million from J$70.16 million in 2010. However, the management said it was exploring ways to reduce costs while seeking additional revenue.

Another subsidiary, Security Administrators Limited, also recorded a decrease in operating profit, down 14.8 per cent to J$34 million from J$40 million for the year, a result attributed to an increase in industry rates paid to security guards.

Stephenson said that with the expansion of the Panama Canal, scheduled for completion in 2014, "the company anticipates the volume of cargo crossing the facility to increase".

Last year, the company began expanding its container-handling equipment to prepare itself for opportunities arising from the widening of the canal and plans to continue rehabilitation of the berths and relocation of warehouses.

"These activities will significantly improve customer service and create valuable space on the terminal to streamline process flow," Stephenson said.

Kingston Wharves is also banking on the offer from the Jamaica Producers Group to increase its stake in the port company as a source of capital to fund implementation of planned projects.

Jamaica Producers is seeking to invest more than J$1.7 billion to increase its stake in Kingston Wharves by 25 per cent. The KWL board has given the all-clear to the proposed investment, but it is subject to approval by shareholders.

mcpherse.thompson@gleanerjm.com