Wilh. Wilhelmsen Holding makes a comeback, but headwinds persist

Norway’s Wilh. Wilhelmsen Holding is making a comeback after a couple of very difficult years for shareholders, although challenges remain.

We expect its interim results, due in early August, to confirm that the company is on the right path, at least financially, notwithstanding challenging shipping and logistics markets.   

Drawing from comparable figures in the second quarter of 2015, second quarter revenues of $854m in the past year were much stronger than in the third and fourth quarters. While there appears to be downside risk into the next trading update (last year it reported EBIT at $103m in the second quarter, and annual EBIT of $165m), recent quarterly results were encouraging, with first quarter group revenues standing at $848m, down only 2% year-on-year, but rising 5% compared to the previous quarter.

The headline numbers in the first quarter pointed to a much higher operating profit (+16% year-on-year) and rising adjusted operating cash flows (+11% year-on-year). However, one caveat is that Wilh. Wilhelmsen benefited from non-recurring gains, with quarterly operating profits up to $143m compared with $96m in the previous quarter – excluding non-recurring gains adjusted operating profit fell 32% quarter-on-quarter.

Nonetheless, the board approved a dividend of NOK3.00 per share, and could declare a second dividend of up to NOK3.00 per share later this year. A dividend of NOK3.00 per share was paid in the second quarter of 2015, followed by a second dividend of NOK2.00 in the fourth quarter.

Its largest operating unit, Wilh. Wilhelmsen ASA, which was responsible for 72% of group revenues in the first quarter, is a provider of shipping and logistics services with focus on the automotive sector and ro-ro customers. It experienced a sharp decline in ocean-transported volumes, partly due to seasonality; the group said that volumes of high and heavy vehicles remained flat, while “auto volumes dropped substantially”.

The unit received a fillip “within the logistics activity supported by acquisitions”, while recording a non-recurring gain of $80m related to investment in logistics activities. The proposed de-merger of Den Norske Amerikalinje was also approved on April 20.

Meanwhile, Wilhelmsen Maritime Services, which turns over 27% of group turnover, has been faced with a soft market. In the first quarter, it came under pressure due to “reduced activity across all business areas”, and was also impacted by the implementation of a new ERP system, which went live in January, boasting 2,000 users across 165 locations

When it reported its 2015 results, the group noted that its stock fell during the year, underperforming the equity market for the second year in a row, but its market cap has roared back since the turn of the year, having appreciated by 10% year-to-date.

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Source: Transport Intelligence, July 13, 2016

Author: Alessandro Pasetti