- Rudolph Brown/Chief Photographer
Caught in discussion (from left) are general manager of the Shipping Association of Jamaica, Trevor Riley, directors of Kingston Wharves Limited, Kim Clarke and Harriat Maragh. They were at the annual general meeting of KWL held on Monday at the Jamaica Conference Centre.
Ashford W. Meikle, Staff Reporter
AFTER THREE years of less than impressive financial performance and a bitter shareholder feud, Kingston Wharves Limited is ready to reclaim lost market share and return healthy profits to investors, according to the Chairman, Grantley Stephenson.
Mr. Stephenson was speaking at the company's annual general meeting, held on Monday at the Jamaica Conference Centre in downtown Kingston. Five new members - all nominees of the National Commercial Bank - were elected to the board of directors. They are Robert Almeida, Peter Lawson, Stephen Lyn Kee Chow, Joseph Sferrazza and Gary Hendrickson. NCB controls 43.97 per cent of KWL stockholdings, which it bought from Grace in January this year.
Previous directors Kim Clarke, Harriat Maragh, Roger Hinds, Charles Johnston, Mark W. Watson and Derek Jones were returned to the board.
The task before the new board is to reverse Kingston Wharves Group's declining financial performance of the past three years as well as recapture market share lost to its competitor, Kingston Container Terminals (KCT).
The latter controls approximately 57 per cent of the domestic cargo handled at the airport while KWL has the remaining 43 per cent.
MERE FIVE PER CENT INCREASE
For its financial year ending December 31, 2003, KWL had turnover of approximately $1.16 billion, a mere five per cent increase over the previous year when it posted sales of $1.10 billion. Cost of sales increased by eight per cent, moving from $479 million to approximately $520 million. Not surprisingly, gross profit appreciated by just three per cent, increasing to $645 million from $627 million.
While these increases were minimal, this appreciation did not translate into the operating profit. In fact, operating profit declined by approximately 51 per cent, diving from $160 million to $79 million. The dramatic decline in the Group's trading profit was as a result of increased operating expenses, which jumped from $26 million in 2002 to $110 million in 2003.
The increase in the operating expenses was principally attributed to redundancy costs (to former employees of Harbour Cold Stores), termination of management contracts and legal fees arising out of the acrimonious feud between former shareholder, Grace and a consortium of shareholders over the control of Kingston Wharves. The consortium which controlled about 49 per cent of Kingston Wharves, secured a major concession from Grace in September last year when A. Rafael Diaz resigned as board chairman. A former CEO of Grace, Mr. Diaz was chairman of the KW board for twenty-five years.
Chartered accountant, Brian W. Young, was appointed as an independent chairman, a selection agreed upon by both parties. Up to that point Grace was the sole nominee of the board members; it witnessed a further dilution of its power in the boardroom when as part of the deal struck with the consortium it relinquished seven of the board seats. The consortium of shareholders, represented by Charles Johnston, Kim Clarke, Harriat Maragh, Roger Hinds and Grantley Stephenson, took five of the seats. The two remaining seats were nominated by Mr. Young and filled by Mr. Watson and Mr. Jones.
After last year's lengthy legal ordeal, Kingston Wharves must now look to returning healthy profits. Mr. Stephenson admitted as much when he said, "the year-presented numerous challenges -resulting in resources being channelled in resolving them."
Pretax profit continued its decline, falling by a third. Similarly, net profit after tax which decreased by 36 per cent in 2002, declined again by 58 per cent in 2003. Kingston Wharves says that it has implemented a development plan which Mr. Stephenson describes as, "a new thrust to reshape the organisation with a view to turning around the company's fortunes and reversing the trend of the last five years of declining profits."
NOT AN EASY TASK
It will not be an easy task. Last year two large container lines, Tecmarine Lines and Mediterranean Shipping Company ceased calls to Kingston Wharves and subsequently pulled out from Jamaica. But, prior to pulling out, at least one of the lines switched to the ports managed by KCT, Kingston Wharves' competitor. The chairman says that line introduced larger vessels which KW could not handle.
With the planned upgrade and investment in new equipment, KW ought to adequately meet the challenge of KCT. So far this year, the company has spent US$4 million on capital expenditure. According to Mr Stephenson, as well as improving efficiencies, the investment will "attract new shipping lines [and] restore market share which has fallen from 50 per cent to 44 per cent in recent years."
The company also plans to refurbish berths eight and nine as well as dredging its berths to handle larger vessels. As part of its strategy to increase revenues, the company plans to submit an application to the Port Authority of Jamaica by mid-2004 for an increase in wharfage rates. KWL also plans to integrate the stevedoring service as well as acquire cargo handling equipment.
This thrust by the new management appears to be paying off.
Kingston Wharves recently achieved the Certification of Compliance of Port Facilities, which was issued under the International Code for Security of Ships and of Port Facility (ISP) before the July 1 deadline. An important certification, the company says it will allow Kingston Wharves "to continue serving as a conduit of trade within the United States market."
And the unaudited six-month results for the period ending June 30, 2004, show a 126 per cent increase in net profit for the group, which now stands at $88 million.
