Source: Market Wire
Operating Profit Increased 2.7 Times; TMM Positioned to Participate in Fleet Substitution and Expansion; Alternatives to Improve Debt Profile Being Explored
MEXICO CITY -- (MARKET WIRE) -- May 02, 2007 -- Grupo TMM, S.A.B. (NYSE: TMM) (BMV: TMM A) ("TMM" or the "Company") a Mexican multi-modal transportation and logistics company, reported today its financial results for the first quarter of 2007.
Management Overview
Javier Segovia, president of Grupo TMM, said, "You can clearly see from our press release that Grupo TMM is growing and is improving its operating performance. Improved results are reflected in not only Maritime and Ports, where both divisions are on target with this year's guidance, but also in Logistics where investments are now occurring. During the third and fourth quarters of 2007 all divisions of TMM will excel. As you know we increased our flexibility as we paid all of our bondholders in full, and we are now ready to seize accretive opportunities as they present themselves in Maritime, Logistics and Ports. Also, during the first quarter we continued to explore alternatives to improve our debt maturity profile and to lower our debt service. We will soon be able to provide our shareholders with more information on these accretive moves and alternatives.
"Our results are reflecting real improvement. EBITDA after corporate expenses in the fourth quarter of 2006 was $7.0 million, and in the first quarter of 2007 was $12.8 million. In 2006 we produced $31.7 million of EBITDA, and in 2007 we anticipate producing an EBITDA of $58 million after corporate expense of approximately $17 million. By the third and fourth quarters of 2007, as Logistics continues to bring on its equipment, and as we position that equipment and eliminate and sell older and unusable assets, the Logistics run rate target of $17 million of EBITDA per year will become a reality."
Segovia continued, "As you all know, the Mexican government has indicated that expanded exploration in the Gulf of Mexico is of paramount importance in order to replace oil reserves that are declining and has determined a need to increase the entire Mexican offshore fleet capability by 11 percent. In 2006, we invested in modern offshore vessels that will enable Grupo TMM to be well positioned to assist the Mexican government in this expansion process.
"In addition, the Mexican government recently announced its decision to replace its product tanker fleet for distribution of oil products in the Pacific and the Gulf of Mexico coastlines. We anticipate that PEMEX will ultimately own 10 vessels and will charter another 10. PEMEX has to replace six owned vessels in order to comply with Marpol regulations. We believe PEMEX will turn to companies like ours which can acquire and operate these vessels, and that have a solid 13-year performance record, with experience and knowledgeable personnel that have managed crews, and that operates under the Mexican flag. Our current and future state of financial options and our knowledge of the Mexican oil industry, joined with the accelerating governmental demand for exploration and for the additional desire to replace product tanker vessels positions Grupo TMM with great competitive advantages. We believe that our Maritime division will meet its target EBITDA of $55 million in 2007.
"Ports are extremely stable as noted in the detail of our release, as we are moving ahead on this division both on the auto handling as well as on the cruise ship segments at Acapulco.
"On the Logistics side we continue to make the investments that we said we were going to make. We have received 130 of the 271 tractor orders placed and have received 305 of the 370 trailers we intended to bring on this year. Additionally, our new truck terminal and maintenance facility should be completed within the next six weeks. We are seeing major advancements in profitability, and you can see that Logistics produced a $0.5 million of operating profit as compared to the $2.3 million loss in the fourth quarter of 2006. As we advance the next several months we will continue to improve our financial flexibility and capabilities within the division. All of our businesses within Logistics are expanding, and you will see the impact of a very profitable Logistics organization in the third and fourth quarters of this year.
"The entire ADEMSA warehouse transaction is ahead of our expectations, and we believe we will meet all of our goals on the warehousing side. We will continue to look for additional warehouses as the summer progresses. At the maintenance and repair and terminals segments, our business is above both revenue and profitability plans. We have told you in the past with the modifications and improvements we are making, Logistics will produce its guidance, and as other transactions are completed we will update you further.
"I want to point out that the demand for our Logistics services is very strong and growing. Despite the loss of a significant amount of revenue and profit from the cancellation of service agreements by Kansas City Southern de Mexico in 2006, bringing our revenue base for Logistics down to $60 million annually, we are in April 2007 at a run rate of $101 million of annual revenue, and we believe we will make $120 million, which is our goal for Logistics in 2007. This number is being accomplished by all of the investments we are making in trucking and through other improvements in infrastructure and technology to enhance utilization and efficiency.
"In order to be in position for the opportunities that we believe are coming, on April 30 the Company's shareholders authorized the Company to proceed to negotiate several transactions, and even though we have not yet consummated agreements, authorization is now in place to improve our current amortization profile, taking advantage of a preliminary rating of AA (mex) by Fitch Ratings for this specific structured debt program. If all goes as planned, we may have the flexibility to issue 20-year Mexican trust certificates ("Certificados Bursátiles") for up to $3 billion Mexican pesos that could increase up to $9 billion Mexican pesos as demand for offshore and product tanker vessels, transportation assets and port terminals accelerates. This kind of long-term financing tied to the useful life of vessels is a first in Mexico. As more details are available we will announce them. Needless to say, any moves we make will be highly accretive. We believe there's a huge opportunity waiting for us as oil exploration vessels and product tankers are replaced in the near future."
Segovia concluded, "As we said last quarter, 2006 proved to be a difficult transition year, and our first quarter results reflect that transition and shed a positive light on future results."
Maritime
Comparing the first quarter of 2007 with the same period of last year:
-- Revenue increased 26.7 percent to $15.7 million in the offshore segment mainly attributable to average daily rate increases and to two additional vessels in operation
-- Cost reduction of 23.1 percent in the offshore segment due to the conversion of vessels from a leased to an owned status resulting in a gross profit increase of 197.4 percent
-- Revenue increase of 72.5 percent to $16.0 million in the tanker segment due mainly to more vessels in operation
-- Revenue increase of 14.6 percent to $7.7 million in the parcel tanker segment due to higher rates and volumes
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