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Northport eyes port capacity expansion
Lim Cian Yai 
Transhipment containers were the biggest contributor to Northport’s growth last year
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Fresh from completing the upgrading works on Wharf 8 in August, MMC Corporation Bhd’s port operator Northport (Malaysia) Bhd is now looking to expand its capacity further.

Azman says Northport plans to grow its footprint by expanding capacity

Northport CEO Datuk Azman Shah Mohd Yusof tells FocusM the port operator is currently scouting for a suitable site to add more capacity.

This development comes amid upcoming capacity expansion by Westports Holdings Bhd and the planned multi-billion ringgit new port city in Carey Island in Selangor.

Westports in August received an approval-in-principle from the government to expand its container terminal facilities from CT10 to CT19, from the current CT1 to CT9 development. The first phase will take place from 2019 to 2024.

The investment will probably cost about RM10 bil and underpin Westports business activities over the next two decades. Should the expansion be completed by 2040, Westports’ total handling capacity will increase to 30 million twenty-foot equivalent units (TEUs) per annum. 

For Northport, capacity expansion will help it grow its footprint. “We do have some spared capacity right now, but at the same time, we are looking for options to enlarge our external footprint. We are looking for land to grow our wharf throughput to ensure our port appeals to more customers, especially those need regional distribution centres,” says Azman. He, however, declines to divulge more details on the proposed expansion.

Indeed there are opportunities for port operators in Port Klang to tap on. In August, Swedish furniture retailer IKEA announced it will establish a RM908 mil regional distribution and supply chain centre in Pulau Indah, Selangor.

 

Bright spot

Azman points out the expected increase in volume from local cargoes is one the bright spots for Northport.

“I think across the board everyone has been affected (in the past six months). Transhipment is not loyal – they have gone to Singapore this year. Nevertheless, they might come back to us in the future. The important thing is, if you look at the numbers, you will see there has been some growth in local cargoes this year.

“As far as we are concerned, we continue to have momentum and react accordingly by offering our integrated logistics services,” he adds.

Northport handled 3.22 million TEUs for the year ended Dec 31, 2016, representing a decent 13.8% increase versus 2.83 million TEUs in 2015.

Transhipment containers were the biggest contributor to its growth, with a 22% year-on-year (yoy) increase, followed by export and import activities of 7.8% and 4.7% respectively.

Topline and bottom line of Northport in FY16 grew in tandem with robust port activities. Profit before zakat and tax saw impressive growth of 57.2% to RM139.4 mil in FY16 from RM88.6 mil the previous year, while revenue expanded by 9.2% to RM694.8 mil against RM636.3 mil.

Northport is part of the diversified MMC Corp Bhd following its takeover last January. Apart from Northport, MMC also owns and operates Pelabuhan Tanjung Pelepas (PTP), Johor Port, Penang Port, Tanjung Beruas Port and Red Sea Gateway Terminal in Saudi Arabia under its ports and logistics division.

MIDF Research in its October report upgraded its recommendation on MMC to ‘Buy’, mainly due to the expected improvement in its ports and logistics segment. The target price for MMC remains unchanged at RM2.63.

The research house believes MMC’s ports and logistics segment could improve in the second half of financial year 2017 (2H17), buoyed by expected improved performance of its two largest ports, Johor Port and PTP.

“The ports and logistics segment registered a slight decline in pre-tax profit of 2% year-on-year in 1H17. However, we believe that this segment could stage a rebound in the second half,” it says.

MIDF adds that Johor Port and PTP are likely to record strong container and conventional throughput volume in 2H17.

“The former is due to higher demand of conventional cargo at its Johor hinterland, while the latter due to a recovery in 2M alliance volume and new services by the Ocean Alliance,” it explains.

 

Challenging times

This year has been a turbulent and challenging time for port operators in Klang. In the first half, port operators were hit by lower volume as shipping lines diverted port calls to Singapore due to consolidation and reshuffling of shipping alliances globally.

As a result, Port Klang Authority (PKA) chairman Tan Sri Kong Cho Ha estimated Port Klang will lose about 1 million TEUs handling volume this year. 

“We grew 10.8% (in volume handling) last year, which is quite exceptional, but volume has declined by about 7% for the first nine months this year as compared with last year.

“Singapore is fighting back as the past two to three years it has lost quite a fair bit of cargo to Port Klang. They have a bigger hub, better connectivity. These are also the reasons some of these shipping alliances are switching to Singapore,” he says.

Shipping lines have suffered financially in the last few years. To survive, shipping lines formed alliances, merged and acquired industry players to enable them have more shared facilities, and achieve cost savings benefit.

In turn, the enlarged and merged entity may also select to re-assess its service offerings and port of calls. Consequently, container throughput will be affected.

Kong adds that port operators will have to decide whether they should continue to expand in the current challenging environment.

“I believe volume will still grow going forward. Just like ports in China, most of the major ports registered double-digit growth in volume. Trading activities are still vibrant,” he says.

That said, there are concerns over the recent massive port capacity expansion in Peninsular Malaysia. There will be two new ports coming up along the Straits of Melaka – Melaka Gateway and Carey Island port city.

Existing port operators Northport and Westports are also expanding aggressively. These concerns have fuelled speculation on whether the Federal Government has shelved the Carey Island port city project.

Kong allays such concerns and says that “we will get there one day” when responding to FocusM’s query.

Transport Minister Datuk Seri Liow Tiong Lai also defended the development, saying it is necessary to handle future demand as the expected rise in Westports’ handling capacity to 30 million TEUs is “not enough”.

 

Lower container throughput for Westports

Westports, which is the benchmark to gauge port activities in Port Klang, has seen a mild decline in volume handled for the first six months this year.

It recorded container throughput of 4.66 million TEUs for the first half, a 5% yoy decline against 4.91 million TEUs last year.

Westports CEO Ruben Emir Gnanalingam had said container throughput of Westports this year is expected to be lower than the previous year.

“The industry’s recent and ongoing mergers and acquisitions could also affect our container volume handled, especially of transhipment boxes. Due to these ongoing changes, we expect our container throughput to be lower this year,” said Ruben.

Westports saw a lower net profit in its first half ended June 30 due to a weaker container volume caused by a sharp fall in transhipment volume.

Its net profit fell 12.46% to RM289.71 mil in the six months ended June 30 from RM330.95 mil a year ago, despite posting a 3.55% increase in revenue to RM1.02 bil versus RM987.34 mil.



This article first appeared in Focus Malaysia Issue 258.