Uncertainty over New Orleans terminal hurts ISG earnings
Uncertainty over the future of a terminal in New Orleans hurt the earnings of International Shipholding Group.
ISG recorded a net loss for the three months ended June 30 of $6.5 million on revenue of $70.1 million versus net income of $4 million on revenue of $67.7 million in the same period the prior year.
The results reflect a non-cash charge of $8.9 million before taxes and $5.8 million after taxes associated with the terminal used by CG Railway, its U.S./Mexico rail ferry service.
ISG decided earlier this year that it would move the U.S. port for that service from New Orleans to Mobile.
ISG made the decision because of closure of the Mississippi River-Gulf Outlet Canal to deep-draft shipping in the aftermath of Hurricane Katrina. The company had been planning to double the capacity of the vessels used in the CG Railway by adding a second deck and rebuilding the New Orleans terminal.
But the company said operating the service out of the facility was made impossible by the closure of the canal, and ISG has decided to relocate CG Railway to Mobile where a new terminal is expected to open later this year or in early 2007.
ISG says it is negotiating with the Port of New Orleans to amend the lease terms to allow other commercial uses of the facility, having discussions with third parties who may have interest in using the facility, and urging Congress to pass pending legislation that would call for the federal government to pay mitigating damages to parties that must relocate from the MR-GO canal.
“Despite these efforts, because of the uncertainty of the long-term use of the New Orleans facility, we believe it is appropriate to be conservative regarding the probability of achieving one of these alternatives, and have currently concluded that our net investment of $8.866 million in the New Orleans terminal has been fully impaired,” the company said, explaining the charge against earnings.
Other factors affecting second quarter earnings included:
* The company’s U.S.-flag coal carrier being out of service for 71 days in the quarter as a result of pre-planned repairs and special survey. The company said the survey will now permit the vessel to operate without interruption for five years barring unforeseen events.
* A drop in eastbound cargo volumes for its transatlantic LASH service, which the company said was partially attributable to Hurricane Katrina. U.S. Gulf petcoke production was seriously damaged resulting in lack of shipments, which make up cargo volumes eastbound for the service. Eastbound cargo volumes for the second half of the year are expected to improve, the company said.