TMM Grupo Tmm S.A. American Depositary Shares

Maritime Shines at Grupo TMM

Ken Nagy, CFA

On May 2, Grupo TMM (TMM) released results for the first quarter of 2012 ended March 31, 2012.

The Company reported mixed results for the quarter due to continued challenging global economic conditions as well as appreciation of the peso against the dollar which resulted in a net exchange loss, negatively impacting net income.

The Company’s first quarter performance resulted in a 4.2 percent year over year decrease in revenue, with revenue dropping $2.8 million to $63.1 million from $65.9 million for the three months ended March 31, 2011.

Maritime segment revenue increased $1.7 million or 4.3 percent year over year to $41.3 million for the three months compared to the comparable period of last year. The improved Maritime revenue was primarily a result of improvements at offshore and at harbor tugs, and to the revenue contribution of the Company's recently acquired shipyard.

Despite the Maritime segment being impacted by the difficult economic marketplace, the offshore business revenue improved 4.4 % and utilization continued its sequential improvement climbing from 74.7% in the first quarter of 2011 to 92.4% in the first quarter of 2012. Also, the Company reported that during the fiscal 2012 first quarter, it renewed three offshore contracts for a three-year period each.

The Maritime division currently has a backlog of $192.6 million.

Recall that TMM acquired a shipyard at the Port of Tampico, which is working at full capacity and contributing to Maritime's revenue and profit. Management expects to have the necessary capabilities to build vessels at this facility, which is in line with PEMEX's intention to add 32 offshore vessels to its fleet, of which 21 are required to be Mexican built vessels.

As of March 31, 2012, Grupo TMM’s net debt was to $748.5 million compared to $675.4 million as of December 31, 2011. It should be noted that the book value of the Company's Trust Certificates debt increased $68.0 million from December 31, 2011, as a result of an 8.2 percent appreciation of the peso against the dollar in the first quarter of 2012.  Still, only 1.7% or $14.0 million of the Company’s current total debt is short term debt.

New Opportunities

In January 2012, Grupo TMM acquired a shipyard at the Port of Tampico which is strategically positioned in the Gulf of Mexico, working at full capacity and contributing to Maritime’s revenue and profit. This acquisition is in line with PEMEX's intention to add 32 offshore vessels to its fleet, of which 21 are required to be Mexican built vessels.

Grupo TMM also continues to work on the development of a container and liquids terminal at the Port of Tuxpan and on the addition of specialized offshore vessels to its fleet.

A Closer Look at the TMM’s Growth Plan

The firm’s five-year growth plan includes two projects. The first project consists of the development of a container and liquids terminal at the Port of Tuxpan, Veracruz. The container terminal will meet increasing demand for capacity in the Gulf of Mexico, taking advantage of organic growth in the Mexican market. The liquids terminal will address current and projected increased demand for imported gasoline and diesel fuel through the construction of a pipeline and a berthing position. Investors should be aware that the development of the facility could take up to two years. Along the same lines, the addition of specialized offshore vessels to TMM’s fleet is anticipated to benefit the Company in meeting increased demand for deep water transportation.

 

For a free copy of the full research report, visit Ken Nagy's page at scr.zacks.com.
 

 
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