Nenaco to cut costs to keep profit targets

Negros Navigation Co. Inc. (Nenaco), the country’s largest shipping group, is looking to reduce costs this year amid rising fuel expenses that threaten to cut the company’s profitability.

Newly appointed Nenaco president and CEO Ramon Villordon said higher costs coupled with competition from airlines remained as challenges, despite the company’s position as an industry leader.

“We’re focusing on fortifying our position in the industry. We’re not adding any capacity,” he told reporters on Wednesday.

He was speaking on the sidelines of the annual shareholders’ meeting of Nenaco subsidiary Aboitiz Transport Systems Corp., which changed its name to ATS Consolidate Inc. The change of name reflects the exit of the Cebu-based Aboitiz family from the shipping business, which the group had led for more than a century.

Today, the company’s operations are split into two main groups: shipping of cargo and passengers, and value added services, mostly for logistics and supply-chain services under the brand 2Go. Each make up about half of the group’s total revenue.

Villordon said the group’s revenue would likely hit P18 billion by yearend, up by 25 percent from last year’s P14.4 billion. The increase, however, would come mainly from the return of ATS ships that were “dry-docked” for maintenance for the most part of last year.

Villordon’s predecessor, Sulficio Tagud, who still sits as chairman, earlier said Nenaco’s group net profit would likely reach P1 billion for 2011.

But Villordon said management was currently “revisiting” this target, saying that fuel prices have put pressure on profit margins.

He said the company’s passenger business, particularly for long-haul trips, would likely remain the weakest part of the firm’s business due to the drop in airline fares.

Freight revenues, which make up 70 percent of the company’s shipping revenues, will stay strong thanks to the country’s improved economic prospects that have led to an increase in domestic trade.

“The economy grew by over 7 percent last year. We’re banking on that,” Villordon said.