The sound and resilient outlook reiterated in the “Perfect Storm” environment… Revenue and EBITDA growth despite the ongoing tension in East Med, the coup attempt in Turkey in July 2016, and the temporary pressure on TEU volumes of Port Akdeniz…
GPH reports consolidated revenues of USD 90.7mn, and a consolidated EBITDA of USD 57.4mn in 9M 2016. This translated into 63.2% consolidated EBITDA margin. Consolidated revenues and EBITDA registered 11.2% and 9.7% increase, respectively. When pro-forma effect of Valletta Cruise Port acquisition is taken into consideration, where consolidated revenues and EBITDA indicate 1.7% and 2.7% growth in 9M 2016 YoY, respectively.
Recent events overshadowed the high Q3 season and put pressure on cruise and commercial volumes in Turkey. These events can be summarized as:
- Ongoing tensions in East Med
- The coup Attempt in Turkey in July 2016
- Investigations launched by Chinese Authorities on marble imports to China in June 2016, which partially continued in Q3 2016
However, this impact remained limited thanks to the contribution of GPH ports outside Turkey, and strong contribution from the commercial business. Cruise passengers in GPH ports in Turkey decreased by 39.7%, as opposed to an overall decrease of 65.3% in Turkey, thanks to world-class security measures and unique excursion choices offered by Ege Ports.
Driven by GPH’s well diversified cruise port network, GPH ports excluding Turkey managed to increase total cruise passengers by 27.6% YoY in 9M 2016. The increase was mainly driven by Barcelona, Malaga, Valletta, and Singapore. When Turkey is included, total passenger base still indicates a satisfactory 10.0% YoY inorganic growth in 9M 2016.
Despite the Perfect Storm environment, GPH managed to maximize revenue and EBITDA creation in 9M 2016 on the back of:
- Inorganic growth: Valletta Cruise Port (Malta) acquisition
- Increasing share of turnaround passengers in total passenger mix, driven by Barcelona and Malaga
- Tariff adjustments thanks to the tariff flexibility at operational ports due to underlying concessions
- 10.4% depreciation of TL against USD in 9M 2016 compared to 9M 2015, which translated into c.2.5% increase in EBITDA, as approximately 70% of costs are in TL in Turkish port operations
Total consolidated revenues came out at USD 90.7mn in 9M 2016, as opposed to USD 81.6mn in 9M 2015, indicating a 11.2% inorganic increase. Revenue increase is mainly driven by cruise revenues, which went up to USD 42.8mn in 9M 2016, posting 15.4% growth YoY. When pro-forma effect of Valletta Cruise Port acquisition in 9M 2015 is included, consolidated revenues indicate 1.7% increase, while cruise revenues imply 4.1% decline due to the shrinkage at Turkish cruise ports.
On the EBITDA front, total segmental EBITDA (composed of operational companies only, excluding GPH solo expenses) posted 10.2% growth in 9M 2016 YoY, at USD 60.3mn. EBITDA maximization was driven by both commercial and cruise segments. Cruise EBITDA registered 5.9% growth in 9M 2016 YoY, reaching USD 27.5mn; while commercial EBITDA increased by 14.1% in the same period YoY, at USD 32.9mn. When pro-forma effect of Valletta Cruise Port acquisition in 9M 2015 is included, segmental EBITDA imply 3.5% organic growth, while cruise EBITDA indicate 6.9% drop due to the shrinkage at Turkish cruise ports.
Cruise EBITDA margin stood at 64.3% in 9M 2016, losing a couple points. On the contrary, driven by the per TEU and per ton revenue increase at Port Akdeniz, coupled with higher yield project cargo effect at both Port Akdeniz and Port of Adria, commercial EBITDA margin posted 390bps increase (reaching 68.5%) in 9M 2016 YoY. As a reminder, cruise EBITDA margin and commercial EBITDA margin for FY 2015 had stood at 72.4% and 67.9%, respectively. Strong revenue and EBITDA performance in 9M 2016 YoY was mainly driven by Port Akdeniz - Antalya, Creuers (Barcelona including Malaga), Malta, and Adria.
Net Debt / EBITDA stood at 3.8x in 9M 2016 compared to 3.3x 2015YE PF (inclusive of full operational year for Malta acquisition).
Gross Debt / EBITDA stood at 4.3x in 9M 2016 compared to 4.3x in FY 2015 in line with bond covenants.
Cruise Port Operations:
Thanks to its well diversified portfolio and successful recent acquisitions, GPH managed to expand its cruise passenger base by a significant 10.0% in 9M 2016 YoY, through organic and inorganic growth. Barcelona, Malaga, Singapore, and Valletta (Malta) were the main contributors to compensate for the shrinkage at Turkish cruise ports to a large extend, and to expand the passenger base. Total cruise revenues and total cruise EBITDA recorded 15.4% and 5.9% growth, respectively. Cruise EBITDA margin went down from 70.0% in 9M 2015 to 64.3% in 9M 2016. The decline in cruise EBITDA margin is mainly attributable to the lower contribution from Ege Ports in Turkey, which operates at 70%-80% EBITDA margin.
Creuers’ (Barcelona including Malaga) revenues increased by 12.6% in 9M 2016 YoY, reaching USD 21.2mn, while EBITDA increased by an outstanding 22.9%, reaching USD 14.4mn. Accordingly, EBITDA margin registered 574bps increase, reaching 67.9% in 9M 2016. Barcelona and Malaga cruise ports’ share of turnaround passengers which are more profitable increased considerably in 9M 2016 YoY, contributing to revenue generation. As the Eur/USD parity was flat in 9M 2016, the increase in Creuers’ revenues and EBITDA in USD terms was the same in Eur terms.
Valletta Cruise Port (Malta), the newcomer in GPH network with its unique position for West Med and East Med itineraries, contributed significantly to GPH’s 9M 2016 revenue and EBITDA performance. Valletta Cruise Port posted USD 9.0mn revenues in 9M 2016, indicating 19.3% increase YoY; while reporting USD 4.0mn EBITDA in 9M 2016 YoY.
Additionally, a 20% tariff increase in Lisbon started to be applied in 9M 2016, which is in line with GPH’s strategy to rationalize and optimize prices at the ports it operates.
Ege Ports (Kuşadası) revenues and EBITDA declined by 27.1% and 31.8%, respectively, in USD terms in 9M 2016 YoY, due to the 32.9% decline in the port’s passenger numbers. Ege Ports has been among the least affected and most resilient ports in Turkey, thanks to the world-class security measures and unique excursion choices it offers. Nevertheless, Q3 was the quarter where the effect of the perfect storm was felt the strongest. Ege Ports’ standalone captured 56% market share in Turkey in 9M 2016, while GPH cruise ports in Turkey composed 70% of Turkey’s cruise ports market in the same period.
Commercial Port Operations:
The pressure on container volumes of Port Akdeniz stemming from the general investigation launched by Chinese officials for imports of marble by the end of May 2016 continued partially in Q3 2016, losing pace and signalling recovery. Port Akdeniz managed to maintain similar container levels in Q3 2016 compared to Q3 2015. TEU throughput of Port Akdeniz declined only by 0.7%, while general & bulk cargo volumes increased by 61.2% in Q3 2016 YoY. (In Q2 2016, TEU throughput and general & bulk cargo volumes had dropped by 9.9% and 25.1%, respectively, YoY.) Meanwhile, total commercial revenues and EBITDA registered a pleasing 21.7% and 26.4% growth rates, respectively, in Q3 2016 YoY.
Tariff flexibility, depreciation of TL, a recently introduced revenue item (Verified Gross Mass - VGM) as well as other side revenues (ie. container storage revenue and stuffing revenue), and project cargo element translated into stronger EBITDA and margins at Port Akdeniz. Container yield increased by 10% in 9M 2016 YoY, reaching USD 203.7, continuing to support the margins. Meanwhile, general cargo yield surged by 66% in 9M 2016 YoY, reaching USD 10.2 per ton. Additionally, 10.4% depreciation of TL in 9M 2016 YoY, led to c.2.5% increase in EBITDA, as approximately 70% of costs are in TL in Turkish port operations. EBITDA increase in constant currencies was 9.9%. Commercial Revenues and EBITDA of Port Akdeniz increased by 8.9% and 12.4%, respectively, in 9M 2016 YoY, translating into 232bps improvement in EBITDA margin in 9M 2016 YoY, which stood at a solid 74.6%.
As for Port of Adria, TEU throughput registered 12.0% increase in 9M 2016 YoY, while cargo volume dropped in 9M 2016 YoY. This is mainly due to the decrease of raw material imports made by a major producer in the region. Container yields came out at USD 100.3/TEU in 9M 2016 at Port of Adria, 6.0% higher than 9M 2015 figure. Meanwhile, the weighted average yield for combined commercial ports operations stood at USD 182.9/TEU in 9M 2016, indicating a solid 7.6% increase YoY. Driven by the project cargo, general cargo revenue per ton climbed to USD 36.9 in 9M 2016 from USD 8.1 in 9M 2015, supporting revenue and EBITDA generation at Port of Adria. Project Cargo elements are basically the machinery, equipment and / constructions to be utilized at regional development projects. Port of Adria’s total revenues remained flat (0.5% increase) at USD 6.5mn, while EBITDA surged by 50.7%, reaching USD 2.0mn, and implying 1,001bps increase in EBITDA margin.