Container Terminal: PAKISTAN INTERNATIONAL CONTAINER TERMINAL LIMITED - Analysis of Financial Statements Financial Year 2003 Financial Year 2007
Pakistan International Container Limited (PICT) is the only Container Terminal in Pakistan sponsored and owned by Pakistanis and the only port infrastructure project whose shares are traded on the Karachi Stock Exchange. Furthermore, it is the first port infrastructure project in Pakistan financed by International Finance Corporation (IFC).
In June 2002, Premier Mercantile Services Ltd (PMS), as Sponsors of the Project, entered into an Implementation Agreement (IA) with Karachi Port Trust (KPT) to design, construct, operate and transfer after 21 years a modern container terminal project at berths 6-9, East Wharf, Karachi Port. The container terminal project commenced commercial operations in August 2002, within the targeted cost of USD 30 million. Within six weeks of taking over possession of the container terminal area from KPT with the existing container handling equipment of PMS, the project started generating business and paying royalty and land rental to KPT.
The terminal currently has 4 Ship-to-Shore (STS) Quay Cranes, 2 mobile harbour cranes, 10 rubber tyred gantry (RTG) cranes and other ancillary equipment. The dedicated area for the terminal is 220,000 square meters. The quay wall length is 600 meters. Amongst the present container terminals in Pakistan, PICT has the deepest designed berths, with a planned alongside depth of 13.5 meters and a current alongside depth of 12.2 meters. An entire power generation plant of 7.4 mega watt capacity is installed with Cummins (UK) generators. PICT aims at enhancing the capacity of the power plant to 10 mega watt.
PICT has constantly enhanced its container handling capacity since the completion of Phase I in 2004, achieving an annual growth of over 100 percent in 2005-06 to 302,000 TEU (Twenty Foot Equivalent Container Units). PICT now serves 4 weekly shipping services and handles on average 27 container vessels a month. PICT has also installed the first Quayside Crane in Pakistan that can lift two empty containers at the same time - thereby doubling its crane productivity on empty container moves. Given the incredible growth of container handing of the terminal, PICT commenced Phase II and Phase III development at a cost of USD 45 million.
Phase II development has been completed and Phase III development will be completed by December 2007. Once the development work has been completed, PICT will have the capacity to handle over 550,000 Twenty Feet Equivalent Container Units (TEUs) per annum. PICT has also commenced e-clearance of cargo under the new Custom's PACCS system (Pakistan Customs Computerized System).
Recent results: During the year 2007, the company achieved a growth in container handling capability by almost 14%. The revenues of the company have also grown significantly by 28% and so an increase in net profit after tax was also witnessed by 15%. PICT aims at increasing the shareholder value by reinvesting its major portion of earnings in the company to support expansion plans in order to capture a significant share in the Pakistan's total container throughput.
During the year, the company installed the Phase III equipment comprising mainly of one Quayside and four Rubber Tyred Gantry Cranes. Furthermore, PICT is setting up the latest scanning and radioactivity detection system. This will enable the company to employ the most methods of non-intensive custom examination by scanning the containers without opening. By the completion of this project, PICT will be the first container terminal in Pakistan to install a 6MEV and Dual Scan Capability Scanner. The upgrading of the company with the terminal operating software N4 will make PICT the fourth terminal in the world to go live with N4.
PICT has shown a praiseworthy trend in its current ratio. The YoY growth in liquidity signifies efficiency on part of the company to enhance its current asset position and pay off its liabilities. Even though PICT acquired long-term loans to finance its expansions, yet the current assets have grown by a greater amount than the current liabilities as reflected in the current ratio trend.
Presently the current ratio hovers around 2.5, showing the excess liquidity that might be curtailed to enhance the container handling capacity further. The dip in FY04 was in line with a greater than proportionate increase in the current liabilities of the company followed by a very large increase in the trade payables and other liabilities for financing the expansion in Property Plant & Equipment (PPE) and Phase I project. After that, PICT has consistently improved upon its liquidity trend, increasing rapidly while simultaneously outpacing its competitors.
Profitability of PICT has generally weakened over the years except in FY05 when it took a rapid upturn. PICT posted a growth of 230% in its gross turnover, as a result of which profitability figures rose considerably. The increase in sales can be partly attributed to the increase in volumes and partly to the increase in tariffs in the same year after the commissioning of the new gantry cranes. The rapid decline in the later years is because of the high base affect arising from higher than proportionate increase in sales revenue. Subsequently the profit margins declined in FY07 as well owing to the above-mentioned reason.
ROA and ROE trends were more or less parallel to the trends of gross profit margins and net profit margins, following the same pattern on account of the aforementioned reasons. PICT has been able to enhance its profitability on account of increased sales volume backed by expansions. The central contribution in the improved performance was the significant reinvestment of the profits back into the business.
The financing of Phase I, Phase II and Phase III expansions have increased the debt ratios for PICT. The major chunk of debt came from International Finance Corporation (IFC) and the Opec Fund for International Development. Financial charges soared as a result, affecting the net income of the company. Part of the expansion was financed through raising ordinary shares through right issues and preference shares.
The financial charges increased substantially in FY05. This is due to the fact that until FY04 the borrowing costs related to the markup on US dollar loans for the Phase I expansion were being capitalized. During the FY05, the grace period of the loan expired and the company started the repayment of these loans. During FY06 and FY07, the financial charges increased further due to the increase in markup on the foreign loans acquired for Phase II and increase in markup on the lease of Phase III assets.
As evident from the trends as depicted in the debt management graphs; debt to assets ratio, long-term debt to equity ratio as well as debt-equity ratios has increased over the years. The debt paying ability of the company as a result witnessed a wavering trend in consequence of the increasing trend in the financial charges. However, the profitability of the company sustained because of the above mentioned factors.
The book value of PICT is commendable. The company has increasingly reinvested the major part of the profits back into the company's expansion projects. Furthermore, the shareholder base was also increased in FY04 to finance the expansions. This in turn increased the share capital for PICT. Increasing book value signifies increasingly high investors' confidence. EPS has also increased after falling in FY04 when the company increased its right shares and preference shares to finance its expansion. P/E multiple has posted an erratic trend nevertheless.
PICT's utilization of assets is praiseworthy. The declining inventory turnover (days) signifies rapid turnover and conversion of stores and spares into sales. Furthermore, DSO ratio has also decreased over the years with the increase in cash sales, reflecting company's prudent policies to change its credit sales into cash sales as quickly as possible. Thus, the operating cycle for PICT has reduced considerably over the years and remains superior to the competitors. Sales/equity and TATO have also climbed up after PICT raised its tariffs, which positively affected its sales revenue and thus asset management ratios.
FUTURE PLANS:With plans by Karachi Port Trust (KPT) to deepen the Karachi Port Channel by 2008, PICT is all set to face the increased demand. The company has equipped itself with the latest equipments to handle the larger vessels. Furthermore, PICT has planned to set up the latest scanning and radioactivity detection system. This will enable the company to employ the most modern methods of non-intensive custom examination by scanning the containers without opening them. Also, with rapid expansion in container handling capacity, PICT is all set to face the forthcoming competition.
Nevertheless, the threat of hike in LIBOR looms around the company, as all the long-term loans are foreign loans. Changing international scenario might have serious repercussions on the company's debt paying ability. While, PICT has generally performed well in all areas, a more concentrated effort towards improving the marketability of the shares will further augment its presence in the stock market.
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PICTL-KEY FINANCIAL DATA
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Income Statement (Rs'000) FY'03 FY'04 FY'05 FY'06 FY'07
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Total Revenue 186,433 372,596 1,232,275 1,707,760 2,186,064
Terminal Operating cost 130,898 260,525 695,915 1,067,086 1,377,999
General & Administrative Expenses 25,257 51,981 128,026 143,836 175,664
Operating Profit (EBIT) 30,278 60,090 408,334 496,838 632,401
Financial Charges 1,174 18,903 73,419 88,963 179,493
Other Operating Income 3,301 4,437 4,070 42,705 67,210
Net Profit Before Taxes 32,404 45,624 338,985 450,580 520,118
Net Profit After Taxes 18,905 25,511 225,015 291,270 331,197
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Balance Sheet (Rs'000) FY'03 FY'04 FY'05 FY'06 FY'07
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Stores & Spares 23,709 44,977 72,923 118,505 168,465
Trade Debts 47,074 67,168 124,345 168,309 137,846
Cash & Bank Balances 101,978 133,237 521,461 756,442 380,540
Total Current Assets 185,925 285,936 788,135 1,208,598 1,259,583
Total Non Current Assets 372,604 1,648,846 1,752,484 2,453,055 3,132,590
Total Assets 558,529 1,934,782 2,540,619 3,661,653 4,392,173
Total Current Liabilities 99,225 267,403 292,491 421,978 446,766
Total Non Current Liabilities 31,830 984,953 1,040,689 1,744,324 2,136,869
Total Liabilities 131,055 1,252,357 1,333,180 2,166,302 2,583,635
Paid Up Capital 408,569 638,008 938,008 938,008 938,008
Total Equity 427,474 682,424 1,207,439 1,495,351 1,808,538
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LIQUIDITY RATIO FY'03 FY'04 FY'05 FY'06 FY'07
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Current Ratio 1.87 1.07 2.69 2.86 2.82
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ASSET MANAGEMENT FY'03 FY'04 FY'05 FY'06 FY'07
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Inventory Turnover(Days) 45.78 43.46 21.30 24.98 27.74
Days Sales Outstanding (DSO) 90.90 64.90 36.33 35.48 22.70
Operating Cycle 136.68 108.35 57.63 60.46 50.44
Total Assets Turnover 0.33 0.19 0.49 0.47 0.50
Sales/Equity 0.44 0.55 1.02 1.14 1.21
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DEBT MANAGEMENT FY'03 FY'04 FY'05 FY'06 FY'07
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Debt to Asset(%) 23.46 64.73 52.47 59.16 58.82
Debt/Equity (Times) 0.31 1.84 1.10 1.45 1.43
Times Interest Earned (Times) 25.78 3.18 5.56 5.58 3.52
Long Term Debt to Equity(%) 7.45 144.33 86.19 116.65 118.15
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PROFITABILITY (%) FY'03 FY'04 FY'05 FY'06 FY'07
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Gross Profit Margin 29.79 30.08 43.53 37.52 36.96
Net Profit Margin 10.14 6.85 18.26 17.06 15.15
Return on Asset 3.38 1.32 8.86 7.95 7.54
Return on Common Equity 4.42 3.74 18.64 19.48 18.31
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PER SHARE FY'03 FY'04 FY'05 FY'06 FY'07
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Earning per share 2.33 0.43 3.30 3.61 4.13
Price-Earnings ratio - 53.49 7.42 21.37 20.53
Book value 10.46 10.70 12.87 15.94 19.28
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COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi.
DISCLAIMER: No reliance should be placed on the [above information] by any one for making any financial, investment and business decision. The [above information] is general in nature and has not been prepared for any specific decision making process. [The newspaper] has not independently verified all of the [above information] and has relied on sources that have been deemed reliable in the past. Accordingly, the newspaper or any its staff or sources of information do not bear any liability or responsibility of any consequences for decisions or actions based on the [above information].
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