Westports expects industry adjustment to end by June this year

Projection is made based on history as experienced by rival in Singapore in 2015


Westports Holdings Bhd is expecting current industry realignment following the new shipping alliance formed within the Ocean Alliance to end by June this year

Group MD Datuk Ruben Emir Gnanalingam Abdullah (picture) said the projection is made based on the industry’s history, as experienced by its rival in Singapore from the previous round of adjustment in 2015.

“The first alignment happened after a new alliance was formed in January 2015. We had benefitted from it, while Singapore lost out. Now, the second alignment is the reverse of that. We expect that to end within 15 months as what we have learned historically from Singapore’s case,” Ruben said after the company’s AGM in Kuala Lumpur yesterday.

Previously, a carrier ship- ping alliance known as the Ocean Three alliance, involving the French CMA CGM SA, United Arab Shipping Co (UASC) and China Shipping Group Co Ltd represented five million 20-foot equivalent units (TEUs) in the region combined.

These companies went through merger acquisitions — CMA CGM acquired Singapore-based APL Co Pte Ltd, Hapag-Lloyd AG merged with UASC, while China Ocean Shipping Co took over China Shipping — that led to a new alliance formed known as the Ocean Alliance.

This alliance comprises CMA CGM, APL, Cosco, as well as Evergreen Marine Corp with much bigger volume of 14 million TEUs in the region collectively.

Ruben said the new alliance requires two hubs in this region on much bigger volume, though the main beneficiary of the new pact would be PSA Singapore instead of Port Klang this time around.

However, Ruben said the company expects the industry to start to normalise again by June 2018, or even earlier, and Westports would expect its growth to pick up after the period.

This year, he added that Westports would experience a slight growth decline in the first quarter of the year (1Q18), flat in 2Q18.

However, he expects the company’s growth to accelerate from 3Q18 onwards, following the conclusion of the readjustment and seasonality.

For the full financial year 2017 (FY17), Westports’ profit increased 5.62% to RM651.51 million for the 12 months, compared to RM616.83 million gained in January- December 2016.

Its revenue also grew by 2.45% to RM2.09 billion for the period, from RM2.04 billion recorded in FY16, contributed by the tax allowances and higher gateway volume.

Westports handled nine million TEUs in FY17, in which transshipment accounted for 69%, or 6.2 million TEUs, and gateway containers increased by 10% to 2.8 million TEUs.

This year, the company would have to pay normal tax rate of 24% as there is no huge capital expenditure to grant for

investment tax allowance incentive that would cut the rate down to 4%, as what it had enjoyed last year on the RM812 million expenditure for the CT8 and CT9 container terminal expansion.

Moving forward, Westports is optimistic about its expansion plan to make the port attractive, and set to rival other ports, especially PSA Singapore.

Ruben said the company is conducting studies on the expansion plan to build new terminals CT10 to CT19, dubbed as the Westport 2, which would span until 2040 of the whole project execution.

Westports expects to invest up to RM15 billion to double its capacity to 30 million TEUs by 2040, from its current capacity of 14 million TEUs.