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Edited Transcript of ICT.PS earnings conference call or presentation 12-Nov-19 9:00am GMT

Q3 2019 International Container Terminal Services Inc Earnings Call

Manila Nov 20, 2019 (Thomson StreetEvents) -- Edited Transcript of International Container Terminal Services Inc earnings conference call or presentation Tuesday, November 12, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Arthur Quintin R. Tabuena

International Container Terminal Services, Inc. - Treasury Director & Head of IR

* Christian Martin Razon Gonzalez

International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate

* Rafael De La Cruz Consing

International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer

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Conference Call Participants

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* C. Wong

JP Morgan Chase & Co, Research Division - Analyst

* Kaseedit Choonnawat

Citigroup Inc, Research Division - VP

* Klyne Resullar

Deutsche Bank AG, Research Division - Research Analyst

* Parash Jain

HSBC, Research Division - Head of Transport Research, Asia-Pacific

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the ICTSI Third Quarter 2019 Investors' Briefing Teleconference. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. Arthur Tabuena. Thank you. Please go ahead, sir.

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Arthur Quintin R. Tabuena, International Container Terminal Services, Inc. - Treasury Director & Head of IR [2]

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Thank you, Ajay. Good afternoon, ladies and gentlemen. Thank you for participating in ICTSI's Third Quarter 2019 Investors' Briefing Teleconference. I'm Arthur Tabuena of ICTSI, and I will be your moderator for this conference call. In a short line, Mr. Christian Gonzalez, ICTSI's Global Corporate Head; and Mr. Joel Consing, CFO of ICTSI will be presenting a company's financial and operational performance for the third quarter, then we will open the floor for a Q&A.

A recording of this briefing will be made available by 8 p.m. tonight until the 14th of November. You may dial any of the toll-free numbers provided in our invitation and use access code 2467456 to listen to the recording. You may also view or download a copy of our briefing presentation, together with SEC Form 17-Q and 17-C for the third quarter results from our website at www.ictsi.com.

At this point, I'd like to turn over the floor to our Head of Global Corporate, Mr. Christian Gonzalez, to start the presentation. Sir?

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [3]

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Thank you, Art, and very good afternoon or good morning to everyone. Joel will be taking you through the details of these financial highlights shortly. But before that, I'd quickly like to express some of the successes from the last 3 months. In a quarter that was very much dominated by talk of social unrest, geopolitical tensions and continued headwinds from the U.S.-China trade war, we've made every effort to extract as much from what is available in our markets as possible with a particular focus towards gaining higher-yielding market share.

In some of our major areas of operation, we've continued to grow throughput, despite seeing overall market numbers remain flat, and that has continued to allow us to sustain the 6% volume growth that's pretty much kept up throughout the entire year. We've also been successful, and we remain optimistic about new services at the greenfield sites. So we're very happy to report that we've added an extra service to SPIA in Colombia and 2 more, as we touched upon in the last investor briefing the previous quarter, 2 more services at VICT, both of which commenced in Melbourne this week.

Despite all this, unfortunately, the headwinds remain and the reality is these headwinds will persist. This isn't without opportunity, however, and we believe that these headwinds allow us to frame a message towards more stringent cost containment with stakeholders.

The spread you see between revenue growth and EBITDA growth highlights our successes in cost management. We're very pleased with what we have seen from our teams, and we see strong signs that these savings will be sustained well into the future. All of this, together with the new services and high levels of efficiency that are benefiting most of our facilities and specifically Colombia, Melbourne and North Harbor in Manila, continue to accelerate earnings.

Finally, we continue to have laser focus on concluding a beneficial outcome in Sudan, creating a viable business in Argentina and taking over our new terminal in Rio, a facility, we believe, will be immediately earnings accretive.

Thank you once again, everyone, for joining the call, and I'd like to turn you over now to Joel to deliver more color on our performance year-to-date. Joel?

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [4]

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Thank you very much, Chris. Very pleased to report our financial performance for the first 9 months of the year. Starting off with the volume. ICTSI handled consolidated volume of 7.59 million TEUs in the first 9 months of 2019, 6% more than the 7.15 million TEUs handled in the same period in 2018. This increased volume of [spending] due to continue in ramp-up at ICTSI's new terminals in L.A., Motukea and Papa New Guinea, improved -- improvement in trade activities in Subic, Philippines, Makati, in the Democratic Republic of Congo and in Basra, Iraq.

We also have had the new contracts with shipping lines and services at VICT in Australia, BCT in Poland, AGCT in Rijeka -- in Croatia and Contecon Manzanillo in Mexico. For the quarter ended September 30, 2019, total consolidated throughput was 5% higher at 2.55 million TEUs compared to 2.44 million TEUs in 2018.

Just giving you some granularity, starting off with Asia. Throughput from the company's container terminals in Asia grew 5% from 3.83 million TEUs in the first 9 months of 2018 to 4.01 million TEUs in 2019. The higher throughput at our terminal operations in Asia was mainly due to the continuing ramp-up of in ICTSI's new terminals in PNG, the new contracts with shipping lines and services of ICT Australia, improvement in trade activities with Subic, but partially tapered, however, by the reduced vessel cost on our terminal in Karachi and at our small terminal in Davao -- DIPSSCOR in Davao.

Asia operations accounted for 53% of total consolidated volume in the first 9 months of 2019. For the third quarter, throughput from the group's operations in Asia increased 1% to 1.35 million TEUs from 1.34 million TEUs in the same period last year.

Moving on to the Americas. Volumes of the Americas is 4% higher in the first 3 quarters of 2019 at 2.24 million TEUs from 2.16 million TEUs in the same period last year. The volume increase in the Americas was mainly due to the new contracts with shipping lines and services at CMSA, higher traded volumes of TSSA with Suape, but partially tapered, however, by the lower trade volumes in a terminal in Puerto Cortes, Honduras.

Americas contributed 29% to total consolidated volume for the first 9 months of 2019. For the quarter ended September 30, the Americas grew 4% at 739,000 TEUs compared to 740,000 TEUs from the previous year.

And finally, for EMEA. EMEA handled 1.35 million TEUs in the first 9 months of 2019, 16% more than the 1.16 million TEUs handled in the same period last year. The volume growth was mainly due to new contracts with shipping lines and services at BCT and AGCT, higher trade volumes at IDRC in Congo and improvement in trade activities in Basra, Iraq.

EMEA operations accounted for 18% of consolidated volume in the first 9 months of 2018. For the third quarter, EMEA operations handled 455,000 TEUs, 17% higher than the 388,000 TEUs registered for the same period last year.

Moving on to revenues. Gross revenues for the first 9 months increased 10% to $1.1 billion -- to $1 billion -- compared to $1 billion reported in the same period last year. The increase in revenues is mainly due to volume growth, tariff adjustments at certain terminals, new contracts with shipping lines, increasing revenues from storage and ancillary services and the contribution from the company's new terminal in Papua New Guinea. For the third quarter 2019, gross revenues increased 3% to $355.6 million from $344 million registered last year.

Okay, revenue contribution from container terminal from Asia increased 14% to $558.3 million in the first 9 months of 2019 compared to $491.2 million registered in the same period last year, mainly due to volume growth, tariff adjustments at certain terminals, favorable container mix and higher revenues from storage and ancillary services, but partially tapered, however, by the lower trade volumes at Karachi and the favorable translation impact of the depreciation of the Aussie dollar-based revenues at a terminal in Australia.

Port operations in Asia accounted for 50% consolidated revenues. And for the third quarter 2019, revenues from the segment increased 3% to $179.3 million from $174.5 million registered in the same quarter previous year.

The Americas generated revenues of $316.7 million in the first 9 months of the year, 6% more compared to the $299.8 million registered in the same period in 2018. The higher revenue is mainly due to increased volume, tariff adjustments at terminals in Mexico, [CGSA and Honduras], increase in revenues from storage ancillary services, partially tapered, however, by lower revenues from the general cargoes at our terminal in Ecuador and the unfavorable translation impact of the depreciation of the Brazilian reais-based revenues on a terminal in Brazil.

The Americas accounted for 29% of ICTSI's consolidated revenues for the first 9 months of the year. And for the quarter ended September 30, our company's operations in Americas increased by 3% to $98.1 million from $95.2 million in the same period last year.

Finally, EMEA operations, which accounted for 21% of our revenues for the first 9 months of the year registered a growth of 8% from $214.7 million in 2018 to $232.4 million in 2019. The increase was primarily due to the strong volume growth, tariff adjustments, increasing revenues from general cargoes and storage at our terminal in Iraq, partially tapered by the unfavorable translation impact of the depreciation of the euro-based revenues in Madagascar and Croatia. Revenues generated by the group's operations in EMEA for the quarter grew 5% to $78.1 million from $74.3 million in the same period in 2018.

Looking at the consolidated P&L highlights. As discussed in the preceding slides, consolidated volume in gross revenue decreased 6% and 10% in the first 9 months of the year, respectively. Consolidated cash operating expense in the first 9 months was 3% higher at $341.6 million compared to $331.6 million in the same period last year. The increase in cash operating expense was mainly due to higher volume, governance mandated and contracted salary rate adjustment in certain terminals and the full 9 months' cost contribution of our terminals in PNG. This is partially tapered by the continuous monitoring of cost optimization measures and favorable translation impact of the Pakistani rupee expenses at Karachi, Aussie dollar expenses at Melbourne and the Brazilian reais expenses in Suape, Brazil.

Consolidated EBITDA for the first 9 months increased 14% to $624.3 million from $564.3 million in the same period last year, mainly due to the strong revenue growth and minimal cash operating expense increase. Consequently, EBITDA margin increased to 56% in the first 9 months of 2019 from 54% in the same period in 2018.

Consolidated financial charges and other expenses increased from $89.2 million in 2018 to $95.2 million in 2019, primarily due to the acceleration of debt issue costs associated with the partial prepayment of the euro-denominated term loan in July 2019. Net income attributable to equity holders of $184.9 million grew by 29% compared to the $142.9 million earned in the same period last year, mainly due to the strong operating income contribution from the terminals in Congo, in Iraq, in Mexico and Manila and Subic in the Philippines. The new contracted shipping lines and services of VICT in Australia, continuing ramp-up at the new terminals in PNG and a decrease in equity and net loss at SPIA with our joint venture container terminal project with PSA in Colombia.

The growth was partially tapered by the acceleration of debt issue costs associated with the partial prepayment for Euro-loan in July 2019 and the nonrecurring gain from the interest rate swap related to the prepayment of deposit finance loans of our terminal in operations in Mexico in 2018. Excluding the nonrecurring items, consolidated net income attributable to equity holders would have increased by 34% in 2019. In terms of fully diluted earnings per share declined 48% to $0.69 (sic) [$0.069] from $0.047 in the same period in 2018.

Okay, moving onto the consolidated P&L highlights for the quarter. The growth rates of the same positive trend, it's the same for the first 9 months of base -- at the lower levels. So here, volume growth is at 5%, revenues grew at 3% and EBITDA, 5%, with the net income attributable to equity holders grew only 7%. One factor for this is the continuing normalization of storage revenues from certain terminals.

Okay, just giving you some granularity when it comes to the -- with regard to the financing charges and other expenses. As mentioned earlier, consolidated financing charges and other expenses for the first 9 months increased 7% from $89.2 million in 2018 to $95.2 million in 2019, primarily due to the acceleration of debt issue costs associated with a partial prepayment of our Euro-loan in July 2019.

The average outstanding debt balance is higher at 17%, up $1.7 billion from $1.4 billion, due to the $260 million loan drawdown in January '19 and the $300 million term loan facility at ICTSI Global Finance B.V. in April 2019, tapered by the loan prepayment of our terminal in Mexico. The average loan tenor is at 4.7 years, and the average cost of debt is 4.5% post corporate income tax.

Moving on to the next slide, converting these numbers to recurring net income. We mentioned earlier that the reported net income attributable to equity holders was up 29% for the first 9 months of 2019, and this included the nonrecurring items from the pretermination of our interest rate swap in Mexico in 2018 and the acceleration of our DIC, or the debt issue costs, associated with the partial prepayment of our loan, Euro-loan in July 2019. Excluding these nonrecurring items, recurring net income would have increased by 34%. For the third quarter, net income would have increased by 12% instead of just 7%.

Okay, and moving on to foreign exchange risk management. In terms of how we managed our currency exposure, operationally, we try to maintain a mixture of U.S. dollars and local currency at all our terminals. So the table that you see in front of you is the same table that we've seen at previous quarters. You will see here on a consolidated basis, 49% of our total revenues are denominated in U.S. dollars, and this translates to about $542.4 million based on total reported gross revenues of $1.107 billion for the first 9 months of the year.

In terms of the expense, however, only 38% of our total expenses are denominated in U.S. dollars, which translates $291.5 million based on total cash expenses of approximately $767 million, thereby putting ICTSI in a net long U.S. dollar position operationally.

The next slide shows you how the U.S. dollars performed against the currencies that are important to ICTSI since January 2015. You will see how volatile it is. And -- but because of our natural hedging, I'll be able to show you later the benign impact on our numbers, if you look at the next slide.

So the next slide, you will see here the yield per TEU and EBITDA margin evolution. So starting off with the yield per TEU evolution, you will see that the organic terminals contributed $4.72 due to the aforementioned yield improvements, but the new terminals contributed $0.79, but the foreign impact was -- foreign exchange impact was a negative $1.95, resulting to a yield of $145.89 in the 9 months of 2019. The EBITDA margin evolution, as illustrated at the bottom chart is, higher by 1.9% to 56.38%, mainly from the organic terminals adding 0.74% and the new terminals, adding 0.38% and ForEx, adding 0.79%.

Note that the ForEx impact was a positive 0.79% as local currency expenses at certain terminals [cascaded] to a lower U.S. dollar equivalent as most EM currencies depreciated against the U.S. dollar, with some effect to the impact so that the impact FX depreciation in EBITDA has risen, again, due to the natural hedging that was executed at our subsidiaries.

Moving on to the next slide. This slide is showing you the yield per TEU comparison from the previous year. You'll see that for the first 9 months of the year, yield per TEU was $5 higher at 146 compared to 141 in the same period last year. Again, this was due to higher revenues from storage and ancillary services and tariff adjustments at certain terminals. The assets contributed a negative impact, mainly due to depreciation of the euro, the BRL and the Aussie dollar.

Okay, Section 2, moving on to the balance sheet. On the company's unaudited balance sheet as of September 30, 2019, you will note that the total assets increased by 2% to $5.4 billion as of September 30 from $5.3 billion as of December 31, 2018, mainly due to the payment of upfront fee related to the concession contract of our terminal in Sudan, the additional investment at North Harbor, investments in capital expenditures, which included expansion projects of our terminals in Iraq, in Mexico and in Manila and port equipment acquisitions. These investments were funded mainly by cash generated from the group's operations and debt financing.

Total liabilities, on the other hand, increased 10% at $3.8 billion, mainly due to the net availment of $300 million term loan facility at ICTSI Global Finance B.V. and the balance of $77.4 million or EUR 64.8 million term loan facility at ICTSI Middle East DMCC business in relation to Sudan.

Total equity, on the other hand, decreased by 12% to $1.7 billion as of September 30, 2019, primarily due to the redemption of the $139.7 million in senior guaranteed perpetual capital securities in May 2018. Payment of dividends and the distribution to holders of perpetual capital securities, tapered by the net income generated for the period.

You will see here that ICTSI's financial ratio as of September 30, 2019, gearing ratio is at a low of 0.96x. Our debt cover ratio was at 2.11x and other leverage and liquidity ratios continues to be stable and remain at healthy levels.

On the next slide, you will see our principal redemption profile. Again, we dynamically manage this, ensuring that we have -- we definitely don't have significant maturities in the coming years. And you will also notice here that in terms of the flow -- in terms of our interest rates, roughly about 97% of our borrowings are fixed rate in the balance [of clearing]. In terms of currency, 78% of our borrowings denominated in U.S. dollars, 14% in Aussie, 5% in euros, and the rest are denominated in emerging market currencies and roughly about 81% of the debt sits to the level of tariff and the rest are sitting at the level of the subsidiaries.

Moving on to capital expenditures. And CapEx for the first 9 months of 2019, excluding capitalized borrowing costs, amounted to $177.7 million or approximately 47% of the $380 million CapEx budgeted for the full year of 2019. As announced in our year-end investor briefing a few months back, the group's CapEx budget for 2019 is approximately $380 million, which is established for our terminals in Manila, Mexico and in Iraq and for maintenance requirements.

Okay, we will be looking at other matters. So we similarly issued our sustainability -- our latest sustainability report. We're in a touch with all 17 UN SDG or scalability development goals. The sustainability report now covers all 18 terminals and you may download a copy of this from our website.

And on the recent events throughout the beginning of the third quarter, on July 29, 2019, ICTSI signed a share purchase agreement with Boreal to acquire 100% of the shares of Libra Terminal Rio or Libra Rio which holds the concession rights to operate, manage and develop the container terminal in the Port of Rio de Janeiro in Brazil.

The concession commenced in 1998 and was extended in 2011 until 2048. Transfer of the facilities to ICTSI management is expected to take place late in the fourth quarter once all conditions precedent and all required regulatory approvals have been obtained.

In August of 2019, ICTSI South Pacific Limited, which is an [active ICTSI] subsidiary that owns 100% of the Motukea International Terminal Limited, entered into an agreement with the local Tatana and Baruni communities represented by the Noho-Mage Holdings Limited for the latter to acquire a 30% stake in MITL. This is in line with a terminal operating agreement entered by ICTSI and the PNG Port authorities.

Another one in August 2019, ICTSI informed the exchange that due to the ongoing political instability in the Republic of Sudan and the failure of the Sudanese government to turn over the South Port Container terminal at the Port Sudan of ICTSI on or before April 7, 2019, revised handover date. The Sudanese Ministry of Finance and Economic Planning earlier sent a letter confirming the remittance of $195.2 million as partial repayment of the $410 million upfront fee in accordance with a refund bond and that the balance will be repaid as soon as possible. ICTSI is in continuous discussion with the Sudanese government for the repayment schedule of the balance of the upfront fee, and ICTSI continues to reserve its right under the concession agreement.

And also, just recently, a jury verdict in Portland, Oregon USA was rendered in favor of ICTSI Oregon Inc., in the case filed against the International Longshore and Warehouse Union in the ILW Local 8 (sic) [ILWU Local 8] for unlawful labor practices. The jury verdict awarded advantages to ICTSI Oregon Inc. in the total sum of USD 93.635 million. The court has yet to enter judgment on the verdict, and once this is entered, the ILWU and Local 8 will have 28 days to file both verdicts motions.

So with that, we'll now open the floor for Q&A. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question from the line of Parash Jain from HSBC.

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Parash Jain, HSBC, Research Division - Head of Transport Research, Asia-Pacific [2]

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I probably will kick start with the usual prospect. If you can add some more color on your expectation of the remaining money to be remitted out of Sudan. And at what point would it -- would you consider it to write it off, assuming this money doesn't repatriate as per your expectation?

On Australia, I mean, we talked during the last results briefing about potential new service and joining at VICT. How are we with respect to our expectation of tracking $500,000 for the full year? And particularly on yield, I mean, especially in Americas, can you shed some color about what has led to decline in yield in third quarter compared to second quarter?

And how should we think about overall yield going into the fourth quarter and perhaps 2020? And the last but not the least is on any update on Argentina?

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [3]

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So [you are right with] Sudan, we are pretty confident that we should be able to collect. We continue to engage them. Unfortunately, we can't really talk with you about -- too much about this, again, simply because of the sensitive nature of this but -- I mean, of this situation. But we are having face-to-face conversations with them. As to when we think -- I'm sorry, we're having face-to-face conversations with them this week, as a matter of fact. As to when we think it will be at risk of a potential write-down from an accounting perspective, incredibly, given the fact that they've already given us close to about 50% of the payment. We think that it shows good faith. The fact that they continue to engage us in discussions as for the payment of the principal through a schedule, we think that this might not probably be required, but the trigger for that, basically, we think is a few months from now, including that, maybe 6 to 9 months from now, which is next year, we will have to decide on whether we will have to provide for this. But again, let me reiterate, we're pretty confident in being able to get these funds. As for your questions on Australia and America, I'll pass it on to Christian?

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [4]

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Sure. If you recall, in the previous briefing, we were very confident about doing one gig service while we were in discussions with another shipping line consortium for another service, both of those have actually been signed. They will be -- both of them, in terms of volume, will be at par with the biggest service we handle today. So we're very, very bullish about volumes next year. These will be including the A3 Central, which we already handle. The 2 new services will be 3 of the biggest services -- 3 of the biggest exchanges that are handled in Australia today. As far as the rest of this year goes, all I could tell you is last month, without the 2 services yet, we already surpassed 50,000 TEU in a month. So again, even with just the existing volume, that's been looking good. And as I had mentioned in the highlights, this is in a market that has remained relatively flat. So the services that we have are actually gaining market share, which means people are becoming more attuned to using our terminal and the services that are there. As far as the Americas go, quite a number of combinations, but the most important reason for the yields coming down there have been the fact that we have new competition coming into places like Ecuador, and we've been signing much longer deals. Deals up to 5 years in term with no contractual break clauses. And of course, in exchange for that certainty over -- for the volume certainty over the 5 years, we've taken a bit of a hit in yield, but that has been strategic in places where we do see competition ramping up. In the other terminals, it's really been related to exchange rate and, in some cases, the mix between transshipment and gateway cargo. That being said, the fundamentals across the entire portfolio are sound. If you strip out storage in a lot of our terminals, you're seeing rates continue to increase -- handling rates continue to increase despite the general competitive environment that we're facing and despite the consolidation of shipping lanes.

Yes. Finally, Argentina, we have a bit of news on that one, the service that we're handling now is gaining a little bit more volume. There's an Asian carrier, who I will not name at the moment, who is very keen on using that particular service and ramping up their volumes on that service, that should be occurring in the coming months. So it's looking better and better. On top of that, we're focusing a lot of our marketing efforts on the Paraguay and Bolivia and Hinterland. Many of the players that bring cargo through Argentina into those landlocked countries are very bullish about using our services, particularly because of the massive cost benefits. That being said, there is also a change of government happening. So it remains to be seen what will happen to the port system in Buenos Aires and how much they push support towards Buenos Aires or Laplata post December, post government handover. So once that's done, in discussions with our auditors, we will start having a hard look at that perhaps making some difficult provisions on that one.

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Operator [5]

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(Operator Instructions) We have the next question from the line of Calvin Wong from JPMorgan.

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C. Wong, JP Morgan Chase & Co, Research Division - Analyst [6]

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A couple questions from my end. One, can you give us a bit of color on sort of Asia operations, particularly MICT and Philippines, broadly? I think when you were expecting a little bit of a pickup in the third quarter, just what's going on there? Because in terms of Asia, third quarter volume growth was a little bit slower. So I wanted to get a sense of what's driving that? And also in terms of sort of the updates on Rio and Kribi, just any guidance on potential financial impact or either the scale of operations there just for us to get a sense of potential financial impact? And lastly, just what are we seeing in terms of broader volume trends fourth quarter to date? Are we seeing meaningful deceleration? Just want to get a sense of what we're seeing on the ground and how we should be thinking about volume trends as we kind of head towards the end of the year and into next year.

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [7]

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Calvin, Chris here. I'll take your first question and your last question, and then Joel will take the rest. On MICT, you recall last year in the middle of 2018, there was quite a lot of severe weather that was impacting China. So a lot of cargo was really being rolled over in Shanghai and many more. That volume, which should have come in the second quarter 2018, actually came in the third quarter of 2018, thus creating a very, very high base. This year, the opposite has happened. A lot of the volume coming in for the holiday peak season into the Philippines has come in the second quarter. However, we are seeing quite a bit of pickup in the fourth quarter here in Manila, whether that can be sustained or not, remains to be seen. But this is also partly driven at MICT by us acquiring more market share. So there is -- you're right, there is a bit of, how do you put it, a stagnant market. Nevertheless, as I did mention when we opened the call, we're working very hard on continuing to grow our market share, helping our customers to grow market share on their particular services and ensure we continue to grow despite any lax development in the markets, particularly in Asia. In other areas, I think, places like -- smaller terminals like PNG were buoyed by having the APAC event there last year. So again, a very, very high base. Coming into this year, that naturally has come down. But the biggest success for us across Asia has really been VICT, substantial volume growth in a flat market and substantial market share growth for the services that are calling our terminal, plus having the 2 new services coming in, we're very bullish on that. Across the entire portfolio, you are seeing some volume swing from one quarter to another and certain areas, like Iraq, where you've had some issues in the fourth quarter now. We'll probably see more of that volume creep into the first quarter next year. In the Congo, we did have some pressures from strikes unrelated to our business but related to logistics within the country that impacted the volumes in the third quarter, but those have now come back to us in the fourth. But, then again, nevertheless, if you look at it in its entirety, the market is fairly slow and our focus will be market share, market share, market share to ensure we continue to grow despite the overall environment being flat. Does that answer your question?

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C. Wong, JP Morgan Chase & Co, Research Division - Analyst [8]

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Yes, that's clear.

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [9]

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Okay, (inaudible) to respond to your question on Rio Libra -- sorry, Libra Rio, rather. So if we had taken over, for example, in 2019 for the full year, we would have been able to generate close to about 100,000, 130,000 -- about 135,000 TEUs in volume. And it would have contributed about USD 50 million in total revenues and about $15 million to $16 million in EBITDA. And so that's the quantum of the contribution that this asset base for the group. So we're very much looking forward to taking over, and we expect to takeover, hopefully, by the first or second week of December.

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C. Wong, JP Morgan Chase & Co, Research Division - Analyst [10]

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Okay, clear. And net -- sorry, just a quick follow-up. Net profit on Rio? Is that also positive?

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [11]

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Yes, definitely. So this will be an immediately accretive position from our perspective.

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Operator [12]

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We have the next question from the line of Parash Jain from HSBC again.

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Parash Jain, HSBC, Research Division - Head of Transport Research, Asia-Pacific [13]

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Joel, just a follow-up question. So on Rio, can you remind us the ticket size? And do you have a similar expectation from Kribi in terms of time line and the magnitude of CapEx as well as contribution?

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [14]

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So for Rio, your question on Rio, it's roughly about 700, 740 -- in U.S. dollars, it's roughly about USD 187 million.

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Parash Jain, HSBC, Research Division - Head of Transport Research, Asia-Pacific [15]

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Okay. Correct. And that's what I thought there. And Kribi is apparently small, right?

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [16]

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Much, much smaller. We're only talking about an [equity settlement] about USD 30 million.

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [17]

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Yes. The team was pretty -- we're negotiating -- remember, it's a multipurpose terminal. We see the potential for containers long term, but we're negotiating with the government on the basis that, if we don't get the deal we want, the best deal for ICTSI and the one that gives us the best ability to run the business the way we do so in the very near future. We will walk away, to be perfectly honest.

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Operator [18]

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We have the next question from the line of [Migel Soredian] from PBI Securities.

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Unidentified Analyst, [19]

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I just have 4 questions. The first is I wanted to ask for more color on Yantai, both on the impact of the U.S.-China trade war as well as tensions between Japan and South Korea, knowing that it does service that particular trade area? Second, any color on Karachi. Are we seeing any meaningful recovery so far? Third, on Brazil, I understand there is some delay as far as passing the EU-Mercosur agreement. So how should we look at Libra as an even swap moving forward? And then fourth is just a housekeeping question. How should we treat book span in Mexico? Any expected start of commercial operations? That's all.

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [20]

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Good question on Yantai. The U.S.-China trade war really isn't the main concern there. The bigger concerns really are tensions between Japan and South Korea. So that has had a bit of an impact on volume. We're still tracking according to budget. And actually, the first couple of weeks of November have looked better than expected. So we're seeing a turnaround from October. Nevertheless, I mean, growth in Yantai has never really shut the lights out. So frankly, we're not expecting anything more than low single digits there. Now as far as Karachi goes, that entire market is suppressed but the other competing terminals are losing volume a lot quicker than we are. So we're holding our ground, and I think now we're starting to see some stability between 45,000 to 50,000 TEU a month there, where I think we will remain going into next year.

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [21]

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Thanks for that, Chris. So as far as Brazil is concerned, we totally hear where you're coming from. But having said that, we continue to be pretty confident that we should be able to grow our business in Rio. But they've just done their dredging, we're bringing in a lot of energy and new relationships just to be able to fill this terminal up, and we're pretty confident we can do that in 2020 and onwards.

Now in terms of book span, we've not undertaken any development yet. So that is going to be left versus a -- as an asset sitting there waiting for development over the next 3 years.

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Operator [22]

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We have the next question from the line of Kaseedit Choonnawat from Citibank.

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Kaseedit Choonnawat, Citigroup Inc, Research Division - VP [23]

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Just 2 very basic questions. Firstly, on EMEA pricing, why is it declining quite significantly year-on-year? And the second question is on Philippines for key terminals in the Philippines, what's your rough market share? And whom are your major competitors?

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [24]

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Yes. Thanks for the questions. I unfortunately have to decline comments about market share. We're proceeding our [take] in a very competitive market, and we like to be very strategic about how we move within the Philippine environment. I hope you don't mind. Now as far as the EMEA yields are concerned, you have to remember that very high-yielding terminals like the Congo also have very low volumes. And when you see some of the volumes swing from one quarter to another, it severely impacts -- because of the denominator, it severely impact the yields. That is not to say, for example, if the yield in Congo goes down this month, that it doesn't come back very, very strongly in the following month. It is a growing market, and it is an exclusive terminal, so there is no deterioration of yields.

In Madagascar, it's a mix issue depending on congestion in places like Mauritius and the Union. There is always a possibility that we will utilize excess capacity to bring in transshipments, which, of course, has lower yields. And so that has an impact on that facility. And another major driver for the new business in Europe, longer-term contracts in places like Georgia, as well as a reduction of storage in terminals like Iraq, which, again, are not a fundamental reduction in storage. It's just really -- it depends on customs policies, it depends on the situation outside of the date. So while you will have it in one quarter and maybe not the next, you may potentially get all of that back the following quarter. So it is a very fluid situation in a place like Iraq.

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [25]

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Yes, just to add to what Christian is saying, if you take a look at which subsidiaries grew within that portfolio, we had substantial growth coming from Croatia, from Georgia and from Poland, which yields are significantly lower than the likes of Congo, for example, and Madagascar, and hence weighing down the (inaudible) on a per unit basis.

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [26]

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Across, not a...

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [27]

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Correct. Yes, in the region.

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Kaseedit Choonnawat, Citigroup Inc, Research Division - VP [28]

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Okay. And very quickly, back to the Philippines. I understand the strategic position and your inability to comment on market share. But I just would like to learn, who are your major competitors in Philippines?

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [29]

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CPW is a major competitor in Manila and small domestic terminals around the [Vitas] and Mindanao for our smaller region -- provincial shipping terminals, independent, codependent, local.

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [30]

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Yes. Sorry. Just to add to what Chris is saying, so just in terms of the domestic market, Manila North Harbor has got a monopoly for container domestic market in the Philippines.

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Operator [31]

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(Operator Instructions) Next question comes from the line of Klyne Resullar from Deutsche Bank.

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Klyne Resullar, Deutsche Bank AG, Research Division - Research Analyst [32]

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A question on the equitized investments, specifically for Colombia. Could you give us some information on the operations there? I understand that it's improving on a year-on-year basis. But are you -- what are you seeing in terms of the sequential improvement? And how should we see the improvements -- future improvements of that port? Second question is on your -- I understand that you've completed the expansion in Iraq already, how quickly can you ramp up operations there? Those are many questions.

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Rafael De La Cruz Consing, International Container Terminal Services, Inc. - Senior VP, CFO & Compliance Officer [33]

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Thanks for that, Klyne. Okay, very interesting. So, it has actually been performing pretty well for us on a year-on-year basis. To put that in perspective in terms of volume, they're going to be -- for the first time of the year, close to about 267,000 TEUs compared to about 130,000 TEUs from the -- compared to the previous year. And similarly, that goes all the way in terms of contributions to revenues down to equity for its net loss contribution to us.

Now if you take a look at their -- their net -- the contribution of their net loss has gone down very significantly. In 2018, the contribution of their net loss was about USD 49 million, close to about USD 50 million. In 2019, that's gone down to about USD 37 million. That's for 100% of the -- of SPIA, and we expect that to -- we expect that to off -- to halve next year, right? So now, unfortunately, the ramp-up is not as fast as we would want it, but it will be able to ramp up and be able to -- and then we continue to sign up more shipping companies. Unfortunately, again, the ramp-up is not as fast.

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Christian Martin Razon Gonzalez, International Container Terminal Services, Inc. - Senior VP & Head of Global Corporate [34]

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On Iraq, so the expansion is done. The 3 new cranes are being commissioned as we speak. What happens there -- you'll recall, we took over an old terminal. As we built the new facility, we've moved the container cargo from the old berths to the new berths that we built and that we've equipped. These new berths have higher yields, lower costs and therefore better margins. And so it's really under our control how much container traffic will move across the basin into the new facility. Now as we do that, we complement that container business by filling the old terminal with general cargo from the oil and gas industry, also very high yield, but also very competitive. I mean it is a competitive market. So to answer your question, filling the new facility is completely under our control, but we do so only when we can ensure we also maximize the capacity that we have in the old facility.

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Operator [35]

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(Operator Instructions) As there are no further questions, I would like to hand the conference back to [the presentation] today.

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Arthur Quintin R. Tabuena, International Container Terminal Services, Inc. - Treasury Director & Head of IR [36]

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Thank you, Ajay. If there are no further questions, allow us to thank you all, once again, for participating in the ICTSI Third Quarter 2019 Investor Briefing. I'd like to remind everyone that a recording of this briefing will be made available at 8:00 p.m. tonight until the 14th of November. You may dial any of the toll-free dial-in numbers provided in our invitation and use access code 2467456 to listen to the recording. Thank you, everyone, and good evening.

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Operator [37]

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Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may all disconnect now. Thank you.