Grupo TMM, S.A. (NYSE: TMM) (BMV: TMM A) ("TMM" or the "Company") a Mexican multi-modal transportation and logistics Company, reported today its financial results for the third quarter and first nine months of 2006.
Management Overview
Javier Segovia, president of Grupo TMM, said, "The year 2006 is a pivotal transition year, many things needed to get done, and many things have been done. The Company has dramatically improved its debt profile while maintaining a reasonable cash position and is diligently focused on improving its equity performance. Maritime investments made since last July are achieving their EBITDA targets.
"Because the $200 million securitization took much longer to complete than we expected, our logistics investments have been delayed. With the completion of securitization in late September we can now build a base for the Company's financial stability. The Company is now free to sell old and inefficient assets and replace them with new and profitable ones. It is now free to collapse multiple layers of organizational structure, which has caused the Company a great amount of inefficiency and is free to now invest its new funds in additional ships, maintenance facilities for trucking, warehouses and transportation assets. As investment and performance continues to improve throughout 2007, TMM will be able to build upon its powerful brand name in an efficient and growth-oriented way."
Segovia continued, "We acknowledge and express management's disappointment that the Company will not meet its 2006 annualized EBITDA objectives described in previous conference calls. The $63 million target will now be $46.6 million entering 2007. Given accomplishments and initiatives under way, the Company is optimistic and determined to improve its EBITDA results between now and the first half of 2007.
"At Maritime, we have invested over $200 million since July of last year to purchase shipping assets and the minority interest in our former offshore and harbor towage ventures, which have improved this business' operating profit and EBITDA. We are rapidly building equity value through the accelerated repayment of the debt associated with our maritime assets, and their market values have continued to strengthen in the existing global environment. The current market value of our two financed product tankers is approximately $82.0 million and of our financed offshore fleet is approximately $151.0 million.
"At Logistics, we intend to replace or add 271 over-the-road tractors and 50 straight trucks to our current tractor fleet of 586 units and add 355 trailers to our current fleet of 825. All of this equipment will be received beginning in November of this year through April of next year. With these acquisitions of new equipment we will eliminate from our tractor fleet equipment which exceeds ten years in age and make Logistics a strong competitor and performer in 2007. Also, we are about to purchase our first warehousing company, which will close in November. As we have mentioned previously, the addition of warehousing facilities and capabilities will round out our logistics platform."
Segovia concluded, "Finally, corporate costs, which have in the past impacted operating profits, should begin to decline during the fourth quarter, as we eliminate our retirement benefits plan for management and fund the pension plan for retirees, as we centralize divisional back office functions, and as we improve the terms of our insurance policies. All of these actions should result in corporate costs of $17 million throughout 2007."
Financial Results
Comparing the third quarter of 2006 with the third quarter of 2005, TMM reported the following results:
-- Revenue of $59.1 million, down 24.3 percent from $78.1 million
-- Operating income of $3.5 million, up $2.4 million from $1.1 million
-- Operating margin of 6.0 percent, up 4.6 percentage points
-- Net loss of $8.0 million compared to net income of $4.1 million
Comparing the first nine months of 2006 with the first nine months of 2005, TMM reported the following results:
-- Revenue of $182.7 million, down 16.3 percent from $218.3 million
-- Operating income of $8.4 million, up $6.1 million from $2.3 million
-- Operating margin of 4.6 percent, up 3.5 percentage points
-- Net income of $63.5 million compared to net income of $148.2 million
Revenues in the third quarter and first nine months of 2006 compared to the same periods of 2005 were impacted by the sale of TMM's port assets in Colombia, amounting to $5.4 million in the third quarter and to $16.3 million in the nine months of 2006. Revenues were also impacted by the cancellation of service agreements with Kansas City Southern de Mexico, reflecting $11.0 million in the third quarter of 2006 and $20.0 million in the nine months of 2006. In the fourth quarter of 2006, the Company anticipates that the sale of its Colombian port assets will impact revenues $3.2 million and the cancellation of the service agreements with Kansas City Southern de Mexico by $9.0 million.
Third-quarter 2006 net interest expense was $7.2 million compared to $15.8 million in the same period of 2005. Net financial cost in third quarter 2006 was $11.4 million, including $5.6 million of amortization of expenses associated with the Company's redemption of its 2007 Notes. Net financial cost in third quarter 2005 was $18.9 million, including $3.0 million of amortization of expenses associated with the Company's debt.
Nine-month 2006 net interest expense was $20.8 million compared to $58.1 million in the same period of 2005. Net financial cost in the 2006 nine-month period was $45.7 million, including $24.0 million of amortization of expenses associated with the Company's redemption of its 2007 Notes. Net financial cost in the 2005 nine-month period was $71.5 million, including $13.6 million of amortization of expenses associated with the Company's debt.
SG&A of $7.6 million in third quarter 2006 decreased 9.0 percent over the same period of 2005. Nine-month 2006 SG&A increased 7.7 percent to $24.9 million over the same period of 2005. The increase in the 2006 nine-month period was primarily attributable to $0.9 million of expenses related to the migration of the Company's technology systems and hosting supplier and $0.4 million in employee bonuses paid in the second quarter of this year.
As of September 30, 2006, TMM's total outstanding debt was $377.2 million, of which $202.9 million is related to the Company's corporate debt and is supported by $177.9 million in a combination of cash, marketable securities and receivables from Kansas City Southern. Project finance debt of $174.3 million related to the acquisition of maritime assets is supported by $128.0 million of long-term contracted revenues, by the Mexican Maritime Law and by the total market value of these assets, which is estimated to be $233.0 million.
Total Debt Composition as of September 30, 2006
(Millions of dollars)
Total Debt Composition as of September 30, 2006
(Millions of dollars)
------------------------------------------------
Securitization Facility $200.0
2006 Notes $2.9
*Two Product Tankers $58.7
*Offshore Vessels $115.6
------------------------------------------------
Total Debt (1): $377.2
------------------------------------------------
Cash + Marketable Securities $87.4
KCS Receivables $90.5
------
Total Cash + KCS Receivables $177.9
------------------------------------------------
Net Debt: $199.3
------------------------------------------------
*Project finance assets
(1) The Company's total outstanding debt as reflected in its balance sheet as of September 30, 2006, includes an additional $2.2 million of accrued unpaid interest and is reduced $8.5 million of related expenses to be amortized over time.
DIVISIONAL RESULTS (All numbers in thousands)
Third Quarter 2006
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Maritime Logistics Ports Corporate and Total
Others
--------------------------------------------------------------------------
Revenues 38,158 20,026 1,017 (147) 59,054
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Costs 27,763 19,200 1,168 (209) 47,922
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Gross Result 10,395 826 (151) 62 11,132
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Gross Margin 27.2% 4.1% (14.8%) n.a. 18.9%
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SG & A 1,293 622 455 5,246 7,616
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Operating Results 9,102 204 (606) (5,184) 3,516
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Operating Margin 23.9% 1.0% (59.6%) n.a. 6.0%
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*Third Quarter 2005
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Maritime Logistics Ports Corporate and Total
Others
--------------------------------------------------------------------------
Revenues 43,400 26,940 7,859 (126) 78,073
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Costs 35,646 26,063 7,039 (117) 68,631
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Gross Result 7,754 877 820 (9) 9,442
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Gross Margin 17.9% 3.3% 10.4% n.a. 12.1%
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SG & A 1,156 1,474 1,008 4,722 8,360
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Operating Results 6,598 (597) (188) (4,731) 1,082
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Operating Margin 15.2% (2.2%) (2.4%) n.a. 1.4%
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First Nine Months 2006
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Maritime Logistics Ports Corporate and Total
Others
--------------------------------------------------------------------------
Revenues 106,292 71,792 4,850 (223) 182,711
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Costs 79,860 66,273 3,538 (320) 149,351
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Gross Result 26,432 5,519 1,312 97 33,360
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Gross Margin 24.9% 7.7% 27.1% n.a. 18.3%
--------------------------------------------------------------------------
SG & A 3,887 4,055 1,237 15,764 24,943
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Operating Results 22,545 1,464 75 (15,667) 8,417
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Operating Margin 21.2% 2.0% 1.5% n.a. 4.6%
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*First Nine Months 2005
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Maritime Logistics Ports Corporate and Total
Others
--------------------------------------------------------------------------
Revenues 116,032 77,102 25,355 (199) 218,290
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Costs 98,479 73,151 21,417 (206) 192,841
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Gross Result 17,553 3,951 3,938 7 25,449
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Gross Margin 15.1% 5.1% 15.5% n.a. 11.7%
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SG & A 3,157 3,960 3,120 12,892 23,129
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Operating Results 14,396 (9) 818 (12,885) 2,320
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Operating Margin 12.4% 0.0% 3.2% n.a. 1.1%
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*2005 results presented under continuing operations
SEGMENT RESULTS
Maritime
Comparing the third quarter and first nine months of 2006 with the same periods of last year:
-- Revenues decreased 12.1 percent in the 2006 third quarter and 8.4
percent in the 2006 nine-month period due mainly to fewer offshore and
tanker vessels in operation
-- Revenues were also impacted $0.7 million from atypical dry-docking
activity in the 2006 third quarter and $3.2 million in the 2006 nine-month
period
-- Improved operating profit and margins at all business segments due to
cost reductions of 22.1 percent in the 2006 third quarter, and of 18.9
percent in the 2006 nine-month period as a result of increased owned
vessels
Logistics
Comparing the third quarter and first nine months of 2006 with the same periods of last year:
-- Overall revenues reflected a decline in both periods due to Kansas
City Southern de Mexico contract losses
-- In the 2006 third quarter, trucking revenues increased 18.8 percent to
$8.5 million and 36.0 percent to $25.9 million in the 2006 nine-month
period due to 106 new tractors acquired throughout this year
-- In the 2006 third quarter, inbound logistics revenues increased 22.7
percent to $5.1 million and 34.1 percent to $15.7 million in the 2006 nine-
month period due mainly to increased volumes at Volkswagen
-- Improved operating profit due to costs reductions of 26.3 percent in
the third quarter and 9.4 percent in the nine-month period mainly due to
the elimination of unprofitable operations and activities
Ports and Terminals
Comparing the third quarter and first nine months of 2006 with the same periods of last year:
-- Revenues were impacted by the sale of port assets in Colombia and by a
reclassification of net revenue at the shipping agencies business segment
-- Revenues at Acapulco decreased $0.4 million to $3.3 million in the
2006 nine-month period due to a $0.8 million revenue decrease in the cruise
ship business segment as a result of reduced calls at this port
-- Auto handling revenues improved $0.4 million in the 2006 nine-month
period as export volumes to South America and Japan increased from 15,758
automobiles to 26,874
Headquartered in Mexico City, TMM is a Latin American multimodal transportation Company. Through its branch offices and network of subsidiary companies, TMM provides a dynamic combination of ocean and land transportation services. Visit TMM's web site at www.grupotmm.com. The site offers Spanish/English language options.
CONFERENCE CALL
TMM's management will host a conference call and Webcast to review financial and operational highlights on Friday, October 27 at 11:00 a.m. Eastern Time.
To participate in the conference call, please dial 888-694-4728 (domestic) or 973-582-2745 (international) and provide conference ID 7917967 at least five minutes prior to the start of the event. Accompanying visuals and a simultaneous Webcast of the meeting will be available at http://www.visualwebcaster.com/event.asp?id=35838. A replay of the conference call will be available through November 3, at 11:59 p.m. Eastern Time, by dialing 877-519-4471or 973-341-3080, and entering conference ID 7917967.On the Internet a replay will be available for 30 days at http://www.visualwebcaster.com/event.asp?id=35838.
Included in this press release are certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements speak only as of the date they are made and are based on the beliefs of the Company's management as well as on assumptions made. Actual results could differ materially from those included in such forward-looking statements. Readers are cautioned that all forward-looking statements involve risks and uncertainty. The following factors could cause actual results to differ materially from such forward-looking statements: global, US and Mexican economic and social conditions; the effect of the North American Free Trade Agreement on the level of US-Mexico trade; the condition of the world shipping market; the success of the Company's investment in new businesses; risks associated with the Company's reorganization and restructuring; the ability of the Company to reduce corporate overhead costs; the ability of management to manage growth and successfully compete in new businesses; and the ability of the Company to restructure or refinance its indebtedness. These risk factors and additional information are included in the Company's reports on Form 6-K and 20-F on file with the United States Securities and Exchange Commission.
Grupo TMM, S.A. and subsidiaries
* Balance Sheet (under discontinuing operations)
- millions of dollars -
September 30, December 31,
2006 2005
============ ============
Current assets:
Cash and cash equivalents 46.539 400.809
------------ ------------
Marketable securities 40.814
------------ ------------
87.353 400.809
------------ ------------
Accounts receivable
Accounts receivable - Net 36.271 43.267
------------ ------------
Other accounts receivable 24.877 19.615
------------ ------------
Prepaid expenses and others current assets 10.423 7.295
------------ ------------
Total current assets 158.924 470.986
============ ============
Long -term account receivable 90.525 48.763
============ ============
Property, machinery and equipment - Net 268.188 166.661
============ ============
Other assets 24.859 23.160
============ ============
Deferred taxes 94.136 83.556
============ ============
Total assets 636.632 793.126
============ ============
Current liabilities:
Bank loans and current maturities of long term
liabilities 29.994 35.546
------------ ------------
Sale of accounts receivable 16.224
------------ ------------
Suppliers 17.993 22.755
------------ ------------
Other accounts payable and accrued expenses 35.634 48.845
------------ ------------
Total current liabilities 99.845 107.146
============ ============
Long-term liabilities:
Bank loans and other obligations 148.996 524.763
------------ ------------
Sale of accounts receivable 175.746
------------ ------------
Other long-term liabilities 24.122 24.471
------------ ------------
Total long-term liabilities 348.864 549.234
============ ============
Total liabilities 448.709 656.380
============ ============
Stockholders´ equity
Common stock 121.158 121.158
------------ ------------
Retained earnings 78.000 14.454
------------ ------------
Initial accumulated translation loss (17.757) (17.757)
------------ ------------
Cumulative translation adjusted (2.710) 1.422
============ ============
178.691 119.277
------------ ------------
Minority interest 9.232 17.469
------------ ------------
Total stockholderÂ’s equity 187.923 136.746
------------ ------------
Total liabilities and stockholders´ equity 636.632 793.126
============ ============
* Prepared in accordance with International Financial Reporting Standards.
Note: In accordance with International Financial Reporting Standards (IFRS)
number 5 "Non-current assets held for sale and discontinued operations" and
International Accounting Standards (IAS) number 21 (reviewed) "The effects
of changes in foreign exchange rates"; Grupo TMM, S. A. shows the effect of
the applications of its Financial Statements.
Grupo TMM, S.A. and subsidiaries
* Statement of Income (under discontinuing operations)
- millions of dollars -
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
======== ======== ======== ========
Revenue from freight and services 59.054 78.073 182.711 218.290
-------- -------- -------- --------
Cost of freight and services (44.354) (66.083) (139.436) (187.610)
-------- -------- -------- --------
Depreciation of vessels and
operating equipment (3.568) (2.548) (9.915) (5.231)
-------- -------- -------- --------
11.132 9.442 33.360 25.449
-------- -------- -------- --------
Administrative expenses (7.616) (8.360) (24.943) (23.129)
-------- -------- -------- --------
Operating Income 3.516 1.082 8.417 2.320
======== ======== ======== ========
Other income (expenses) - Net 0.091 9.170 (0.370) 8.544
-------- -------- -------- --------
Financial (expenses) income - Net (7.237) (15.777) (20.842) (58.058)
-------- -------- -------- --------
Amortization of expenses related to
debt (5.652) (2.966) (24.003) (13.611)
-------- -------- -------- --------
Exchange gain (loss) - Net 1.513 (0.157) (0.843) 0.138
-------- -------- -------- --------
Net financial cost (11.376) (18.900) (45.688) (71.531)
-------- -------- -------- --------
Loss before taxes and profit
sharing (7.769) (8.648) (37.641) (60.667)
======== ======== ======== ========
Benefit (provision) for taxes and
profit sharing 0.847 (1.731) 3.646 6.571
-------- -------- -------- --------
Net loss before discontinuing
operations (6.922) (10.379) (33.995) (54.096)
======== ======== ======== ========
Income from discontinuing
operations 1.364
-------- -------- -------- --------
(Loss) income from disposal
discontinuing business (0.781) 15.618 98.610 203.622
-------- -------- -------- --------
Net (loss) income for the period (7.703) 5.239 64.615 150.890
======== ======== ======== ========
Attributable to:
Minority interest 0.295 1.095 1.068 2.701
-------- -------- -------- --------
Equity holders of GTMM, S.A. (7.998) 4.144 63.547 148.189
======== ======== ======== ========
Weighted average outstanding shares
(millions) 56.963 56.963 56.963 56.963
(Loss) income earnings per share
(dollars / share) (0.14) 0.07 1.12 2.60
Outstanding shares at end of period
(millions) 56.963 56.963 56.963 56.963
(Loss) income earnings per share
(dollars / share) (0.14) 0.07 1.12 2.60
======== ======== ======== ========
* Prepared in accordance with International Financial Reporting Standards.
Note: In accordance with International Financial Reporting Standards (IFRS)
number 5 "Non-current assets held for sale and discontinued operations" and
International Accounting Standards (IAS) number 21 (reviewed) "The effects
of changes in foreign exchange rates"; Grupo TMM, S. A. shows the effect of
the applications of its Financial Statements
Grupo TMM, S.A. and subsidiaries
* Statement of Cash Flow (under discontinuing operations)
- millions of dollars -
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
======== ======== ======== ========
Cash flow from operation activities:
Net loss before discontinuing
operations (6.922) (10.379) (33.995) (54.096)
-------- -------- -------- --------
Charges (credits) to income not
affecting resources:
Depreciation & amortization 5.097 7.520 16.274 21.115
-------- -------- -------- --------
Deferred income taxes (1.770) (0.038) (5.171) (9.685)
-------- -------- -------- --------
Income from discontinued
operation 3.139 71.854
-------- -------- -------- --------
Other non-cash items (0.726) (14.547) 16.441 (13.642)
-------- -------- -------- --------
Total non-cash items 5.740 (7.065) 99.398 (2.212)
-------- -------- -------- --------
Changes in assets &
liabilities 0.525 (16.490) (37.743) 14.246
-------- -------- -------- --------
Total adjustments 6.265 (23.555) 61.655 12.034
-------- -------- -------- --------
Net cash provided (used in) by
operating activities (0.657) (33.934) 27.660 (42.062)
======== ======== ======== ========
Cash flow from investing
activities:
Proceeds from sales of assets
(net) 0.188 0.539 9.089 1.760
-------- -------- -------- --------
Payments for purchases of assets (38.543) (78.798) (135.298) (91.005)
-------- -------- -------- --------
Acquisition of shares of
subsidiaries (0.392) (19.462) (34.059)
-------- -------- -------- --------
Sale of share of subsidiaries 18.876 210.680
-------- -------- -------- --------
Dividends paid to minority
partners (1.680)
-------- -------- -------- --------
Net cash (used in) provided by
investment activities (38.747) (59.383) (147.351) 87.376
======== ======== ======== ========
Cash flow provided by financing
activities:
Short-term borrowings (net) (0.150) (0.150) (0.450)
-------- -------- -------- --------
Principal payments under capital
lease obligations (0.126) (0.151)
-------- -------- -------- --------
Sale (repurchase) of accounts
receivable (net) 191.624 191.624 (74.972)
-------- -------- -------- --------
Repayment of long-term debt (166.610) (0.616) (507.042) (69.474)
-------- -------- -------- --------
Proceeds from issuance of
long-term debt 30.340 69.645 121.803 72.970
-------- -------- -------- --------
Net cash provided (used in) by
financing activities 55.354 68.753 (193.765) (72.077)
======== ======== ======== ========
Net increase (decrease) in cash 15.950 (24.564) (313.456) (26.763)
-------- -------- -------- --------
Cash at beginning of period 71.403 50.949 400.809 53.148
-------- -------- -------- --------
Cash at end of period 87.353 26.385 87.353 26.385
======== ======== ======== ========
*Prepared in accordance with International Financial Reporting Standards.
Note: In accordance with International Financial Reporting Standards (IFRS)
number 5 "Non-current assets held for sale and discontinued operations" and
International Accounting Standards (IAS) number 21 (reviewed) "The effects
of changes in foreign exchange rates"; Grupo TMM, S. A. shows the effect of
the applications of its Financial Statements.
TMM COMPANY CONTACT:
Juan Fernandez
Chief Financial Officer
011-52-55-5629-8778
(Email Contact)
Brad Skinner
Senior VP, Investor Relations
011-52-55-5629-8725
203-247-2420
(Email Contact)
Monica Azar
Manager, Investor Relations
212-659-4975
(Email Contact)
AT DRESNER CORPORATE SERVICES:
Kristine Walczak (investors, analysts, media)
312-726-3600
(Email Contact)