After three years of boom and bust, Chile’s CSAV hopes a new business model and $1.2 billion in fresh capital will provide smoother sailing for South America’s largest container line.
“We are a new company today,” CEO Oscar Hasbun said after a second stock issue completed the recapitalization. “Through this restructuring, we are better prepared … for when market conditions improve.”
CSAV reported a $145 million loss on continuing operations in the fourth quarter, compared with a $7 million operating profit a year earlier, but noted the results were an improvement on losses of more than $300 million in each of the two previous quarters and were better than those of many competitors.
Full-year losses on continuing operations totaled $959 million. An additional $280 million loss on discontinued operations pushed the total deficit to $1.24 billion.
Revenue fell 1.2 percent to $5.15 billion for the year as lower rates offset a 7.5 percent increase in traffic to 3.1 million 20-foot equivalent units. Fourth quarter revenue fell 28 percent to $801 million as CSAV trimmed capacity.
Like other carriers, CSAV blamed last year’s red ink on stiff competition that forced rates down; slack demand, particularly in the second half of 2011; and a 35 percent increase in bunker fuel prices.
Except for oil prices, CSAV said it sees “some signs of improvement … that could eventually translate into a better market panorama in the coming quarters.” These signs include idling of excess ships, increased joint services and recent announcement of rate increases on major routes.
CSAV has taken steps required for it to benefit “as soon as market equilibrium returns to the industry,” Hasbun said.
The company’s new business model contrasts sharply with the one prevailing three years ago, when CSAV aggressively added services worldwide and went on a chartering binge that vaulted the carrier from 16th to seventh in global fleet capacity.
Heavy losses brought CSAV close to collapse until German shipowners agreed to a debt-for-equity rescue in 2009. Since then, the Chilean carrier has been pruning its service network and trimming the size of its fleet.
That process accelerated last year as CSAV returned chartered tonnage to owners and entered vessel-sharing and space-charter agreement with competitors. The company plans by mid-2012 to reduce its total vessel capacity by 50 percent from early-2011 levels and already has trimmed it by one-third.
CSAV now depends on joint services with other carriers for almost 90 percent of its volume, up from about 30 percent in early 2011. It expects to increase the percentage of owned ships in its fleet to more than 30 percent by midyear, from 9 percent in early 2011.
While slimming down its operations, CSAV has bulked up its balance sheet. This month’s issuance of $412 million in new stock was the final piece in a $1.2 million capital increase authorized at a shareholders’ meeting last October. The company sold $788 million in stock earlier this year.
The $1.2 billion in new capital includes $547 million invested by the Luksic family’s Quenenco group, which now holds 37.44 percent of the company. Marinsa, controlled by the Claro group, purchased $100 million, and has a 12.35 percent stake. Other shareholders and third parties acquired $533 million.
The capital infusion cleared the way for a spinoff of CSAV’s terminals, tugs and logistics unit, SAAM. The subsidiary, renamed SM-SAAM, posted a 15 percent increase in operating profit to $64 million last year as sales rose 18 percent to $426 million.