Adsteam To Raise $40m After Big Loss
Sydney Morning Herald
Wednesday September 3, 2003
In a bid to ease its crippling debt burden, Adsteam Marine yesterday announced a $40 million capital raising after reporting its first loss since its 1997 relisting.
Despite a slight fall in revenues from its Australian tugboat fleet, Adsteam chief executive John Moller said he was ``struggling to understand" how the company's new rival, Australian Maritime Services (AMS), could represent any significant threat to Adsteam's stranglehold on the domestic towage market.
Adsteam reported a full-year loss of $62.7 million, down from the previous year's net profit of $30.5 million, largely in line with expectations.
The result included a write-down of $61.9 million, mostly associated with the group's underperforming Alaskan tug and barge business, Northland.
Adsteam also was hit by $23.3 million in costs, as part of its two-year plan to slash administration costs and tug crew numbers.
Looking ahead, Mr Moller said Adsteam's profits would be ``slightly higher" than yesterday's pre-abnormal profit of $22.5 million.
Despite a 6.4 per cent slide in revenue to $329 million, Mr Moller said: ``With wars, with drought, bow thrusters [on ships], competition; all of those variables, pretty much year on year it's been a steady [result]."
The only part of the business to record a lift in revenue was the UK harbour towage business.
Yet Mr Moller said the entry of AMS had had little effect on profits. ``In fact, I think we're further progressed, particularly in Australia because of competition," he said.
With AMS holding 33 per cent of the Melbourne towage market and 20 per cent of Brisbane's, and planning to expand into Sydney next month, Mr Moller also downplayed the significance of AMS having the financial backing of two of Hong Kong's largest companies.
``I can't actually see this as a Hutchison Whampoa or Swire play. This is a very long arduous process to try to get a serious position in the Australian market. Why wouldn't they actually just buy Adsteam?"
Citing the last major challenge to Adsteam, Mr Moller said: ``We saw several years ago BHP exit the port [of Newcastle] after being unprofitable in a much larger port than Melbourne and Brisbane, where they were the principal customer in the port and they were supported by five Japanese shipping companies.
``If BHP couldn't make it work I'm struggling to understand how the AMS business plan model will work," he said.
With about $35 million of Adsteam's capital raising underwritten by ABN Amro Rothschild and set to be taken up by institutional investors, the other $5 million will be issued under a share purchase plan. The final details and pricing of the raising will be announced this morning.
With net debt at June 30 of $416.1 million, down $22.8 million from the previous year, Mr Moller said debt would be further slashed through the capital raising and sale of the Alaskan Northland business.
Adsteam expects to extract $10 million in cost savings by 2005 and has already signed its first union agreements in Brisbane and Gravesend in the UK, from where it expects to save $3.5 million in labour costs a year.
Signalling a major culling of Adsteam's 1800 workforce, Mr Moller said crew numbers had been cut from 96 to 76 in Gravesend and said Adsteam hoped to sign a new union agreement in each port each month.
No dividend was declared.
© 2003 Sydney Morning Herald
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