STEAMSHIPS Trading Company has recorded an annual profit of K88.6 million, down 22.2 per cent on the previous year, as the stimulus provided by the construction phase of the PNG LNG project came to an end.
Activity levels across the company’s logistics operations – Consort Express Lines, Steamships Shipping and Stevedoring, East West Transport and Pacific Towing – had slowed in 2014, the company said in its preliminary final report.
“The focus for 2015 will be on reducing structural costs to enhance competitiveness,” the company said.
Despite the slowdown, sales were up 1.2% to K941.7 million while capital expenditure was K201.3 million, against K224.7 million in 2013 – when full year profits were K114 million.
“Weaker agricultural commodity prices and the stronger Kina also took their toll on the non-resource sector of the economy which supports the vast majority of Papua New Guinea’s citizens,” the company said in its profits announcement.
“The recent collapse in oil and gas prices will bring uncertainty and possible delays to anticipated projects but the quality of PNG resources should mean that it is a question of when not if development will recommence.”
Steamships would exercise a degree of caution in the short-term, it said, but remained confident in the long-term prospects for the PNG economy.
The company’s Coral Sea Hotels operations had maintained occupancy rates despite increased competition in Port Moresby and Lae, while the Pacific Palms Property operations were well positioned to ride out stresses caused by over-supply, Steamships said.
Its management of Laga Industries as it transitioned from being a manufacturer of a variety of consumer goods to focusing on ice cream manufacturing, sales and distribution had been a challenge, the group said.
“New management will be applying a more disciplined and structured approach to delivering the basics in a more reliable manner. Investment in a doubling of freezer and manufacturing capacity reflects the commitment to the potential of the ice cream business,” Steamships said.
The news came after Steamships announced the closure of its East West Transport division’s Highlands Highway Operations.
Steamships said its accounts reflected a fleet and inventory impairment, together with redundancy costs, of PGK 15.7 million (post tax).
“This sad decision follows a lengthy review of the operation which has served the region for many years,” the company said in an announcement.
“However, since the end of the ExxonMobil PNG LNG development there is a glut of capacity, which when combined with the continuing deplorable state of the highway and insecurity leaves an unsustainable operation.”
The residual East West Transport business will during the course of the year be amalgamated with that of Steamships’ Joint Venture Stevedoring business to form an overall land based logistics division, the company said.
This parallels a similar amalgamation of the group’s marine divisions of Consort Express Lines Limited and Steamships Coastal Shipping.
Both combinations target efficiency alignment and synergy cost savings in a competitive economic environment, Steamships said.