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Maritime Shows Strength at Grupo TMM

Zacks Equity Research

Maritime Shows Strength at Grupo TMM

By Ken Nagy, CFA

On October 25, 2012 Grupo TMM (GTMAY) released results for its third quarter and nine months ended September 30, 2012. The Company reported mixed results for the quarter due to lower tariffs and lower utilization at the product tanker segment and reduced operations at Acapulco.

Despite the global downturn in this industry, the Company secured three new vessel contracts during the quarter, totaling $30 million in revenue and demonstrating the irrepressible nature of the Company’s Maritime division.

Likewise, the Maritime division’s buoyancy was further verified by its strong and growing backlog of $175.6 million to date, which is up from a backlog of $167.6 million as of June 30, 2012.

The Company’s third quarter performance resulted in a 3.1 percent year over year decrease in consolidated revenue, with revenue decreasing $2.2 million to $66.7 million from $68.8 million for the three months ended September 30, 2011.

Yet Maritime segment revenue improved $142,000 or 0.3 percent year over year to $44.6 million for the three months. The improvement was primarily a result of improvements at all divisions except for product tankers, which was negatively impacted by one unemployed vessel, by lower year over year average  daily tariffs as well as by two less vessels in operation, that were lease in the third quarter of 2011.

For the first nine months of 2012, Maritime revenue fell 1.4 percent year over year to $125.9 million. The decrease in year to date Maritime revenue was mainly driven by revenue losses at product and chemical tankers.

Utilization at the offshore segment continued its upward trend at 89 percent, improving sequentially from 88.5 percent for the second quarter and jumping to 90.1 percent during the first nine months of 2012, up from 83.3 percent for the comparable period of 2011.

Third quarter 2012 consolidated EBITDA was $23.7 million, improving by 26.1 percent year over year from $18.8 million in the same period of last year.

Consolidated EBITDA for the first nine months of 2012 was $55.2 million, a decline of 10.2 percent compared to $61.5 million for the comparable period of 2011.

It should be noted that while the Company’s Maritime segment’s third quarter EBITDA was $21.1 million and unchanged from the 2011 third quarter, the division continues to generate competitive EBITDA margins.

As of September 30, 2012, Grupo TMM’s total net debt was $760 million compared to $675.4 million as of December 31, 2011. The book value of the Company's Trust Certificates debt increased $62.9 million from December 31, 2011, as a result of a 7.7 percent appreciation of the peso against the dollar in the first nine months of 2012.

Furthermore, only $17.1 million or 2.1 percent of Grupo TMM’s total debt of $832.7 million is short term.

Similarly, Grupo TMM’s free cash flow for the three months ended September 30, 2012 was $8.0 million.

Management believes that the future holds profitable opportunities for Grupo TMM and expects to reach an agreement for the financing of the development of a container terminal at Tuxpan before year end.

The container terminal at the Port of Tuxpan, Veracruz will meet increasing demand for capacity in the Gulf of Mexico, taking advantage of organic growth in the Mexican market.

Additionally, the Company is currently working on a potential joint venture with an international shipyard, which would provide the necessary capabilities to build vessels at its own shipyard at the port of Tampico, positioning TMM in a new niche market of building vessels, for the Company or for third parties, both of which would significantly grow revenue and profit base in the longer term.

Please visit Ken Nagy's coverage page at scr.zacks.com to access a free copy of the full research report.

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