- Company may spend only half of $530 million budget this year
- Exploring options in Greece, Africa; slowing other projects
International Container Terminal Services Inc. expects to spend only half of the $530 million it budgeted for this year as the Philippine port operator limits its expansion amid slowing global growth, Chairman and President Enrique Razon said.
“The growth picture of the global economy is not looking too great,” Razon, 55, said in an interview Oct. 2 in Manila. Profit at the company has mainly been driven by acquiring new terminals rather than by organic growth, he said.
The company, known as ICTSI, has built a portfolio of sea ports from Manila to Oregon to Ecuador as global trade boomed over the past decade, driven by China’s rapid growth. The trade picture has since dimmed, with the World Trade Organization recently cutting its forecast for global trade to 2.8 percent growth this year, from 3.3 percent previously.
In July, the International Monetary Fund forecast the world economy to grow 3.3 percent this year, down from 3.4 percent in 2014. Economic Planning Secretary Arsenio Balisacan said last month the Philippine economy could still grow between 6 percent and 6.5 percent this year, after it grew 5.6 percent in the second quarter.
“That kind of growth in the world now is already spectacular," Razon said. “If the Philippines continues to grow 4 percent to 6 percent, our companies should do pretty well.”
ICTSI shares fell as much as 1 percent Monday to 73.25 pesos, their lowest level since December 2012. The stock has fallen 36 percent this year, outpacing the 5.1 percent drop in the benchmark Philippine stock index.
Net income in the second quarter fell 6 percent from a year earlier to $46.4 million, with the depreciation of the euro and the Brazilian real affecting revenue, the company said Aug. 10. Half of ICTSI’s revenue is in dollars, giving the company a natural currency hedge, Razon said.
Capital spending in the first half of the year was $136.7 million, accounting for 26 percent of its $530 million annual budget, the company said in August.
Despite the global slowdown, ICTSI’s earnings may rise as new terminals begin operations, Razon said. ICTSI just completed a terminal in Argentina, has projects under way in Colombia, Congo and Australia and is exploring investment opportunities in Greece and Africa, he said.
Razon, whose net worth was estimated at $3.7 billion as of Oct. 2, said ICTSI has yet to decide if it will bid for a 17 billion-peso ($364 million) project to modernize the Sasa sea port in the southern Philippines. Razon said he could be interested in investing in airports as well.
“We have to be in a position with enough cash to take advantage of some opportunities, be they distressed or not,” Razon said. “This is the time to make good moves that will make you a lot of money down the road.”