Piraeus Port Authority: prospects, expected developments, main risks and uncertainties in 2nd semester

Piraeus, Greece (PortSEurope) September 27, 2019 - As part of its second half financial results for 2019, the Board of Directors of Piraeus Port Authority SA, operated by China’s COSCO Shipping Ports Limited, has reported on prospects, expected developments, main risks and uncertainties in 2nd semester. The nature of PPA's business activities depends on a wealth of domestic and external macroeconomic and geopolitical data with a focus on the countries of the Southeastern Mediterranean and the countries served through the port of Piraeus. It is further affected by developments in the global port industry in general, as well as the development of individual port activities that are largely related to both PPA's investment program and the level of service provided to port users. In the commercial port (container and car terminals) in addition to further highlighting the strategic advantage of the port's geographical location as a transhipment hub at the crossroads of three continents, the main challenges come from the international trading environment. The impact of trade tension between the US and China, directly or indirectly, negatively impacts global growth. However, it mainly has a negative impact on the demand for durable consumer goods which negatively impacts container and car shipping lines. The overcapacity in the ship container sector is increasing the pressure to reduce port charges. At the same time, capacity consolidation through acquisitions and alliances is reducing potential port customers. In this context, Piraeus enjoys a privileged position as a transhipment hub for the largest shipping companies and alliances. An important advantage is also the fact that COSCO Shipping, whose subsidiary is COSCO Shipping Lines Company, the third largest shipping company and member of the Ocean Alliance, holds the majority of shares in PPA. At the same time, however, the rapid growth in attraction of new customers over the last decade has created the need for new infrastructure expansion which will allow further strengthening of the port's leading role. In the car terminal sector, vehicle sales in Europe declined by 3.1% in the first half of 2019 as a result of relatively modest economic growth. This adversely affects traffic volumes and increases the storage time at port terminals and the economic efficiency of port infrastructure. In this context, Piraeus records a reduction in cargo traffic without affecting the long-term positive outlook based on the strategic position of the port serving the coastal countries of three continents. On the other hand, as Greece gradually recovers after almost a decade of financial crisis, both vehicle registrations (+5.2%) and consumer spending are on the rise. Given the deferred demand following the end of the political elections, the outlook for domestic car traffic is estimated to be positive. In the cruise sector, the geopolitical situation in the eastern Mediterranean continues to pose challenges. Economic instability and geopolitical developments in Turkey do not allow demand and supply of destinations to match. As a result, cruise liners have increased in the western Mediterranean and at the same time tonnage and itineraries have shifted between the Adriatic and the Aegean islands. This rearrangement poses challenges for Piraeus in the short term which is tackled with an aggressive sales policy and coordination of actions within institutions at regional and Mediterranean levels. At the same time, however, this situation provides the time needed to develop the planned cruise infrastructure and restructure services so that Piraeus is in the centre of the eastern Mediterranean cruise at the normalisation phase. The results of the Company’s actions increased arrivals in 2019 versus 2018 and a further increase in cruise ship reservations is recorded for 2020. In the field of ship repairing, figures for the first half of the year show an increase due to increased availability of drydocks and increased demand from ships. This trend is expected to continue in the second half of the year, driven by the demand for services that are now integrating Piraeus into potential options as well as the need for ships to adapt to the 2020 sulphur emissions regulations. In the first half of the year, coastal traffic volumes recorded an increase, which is expected to be maintained during the peak months, contributing to the corresponding financial improvement. At the same time, however, the increase in fuel prices is expected to have a negative impact on both the cost of service of the ferry companies and the competitiveness of the fleet vis-à-vis the airline and therefore remains a challenge for the future. Credit Risk: There is no significant credit risk for the Company towards the contracting parties, since it receives advance payments or letters of guarantee from customers. In addition, the Company's deposits are placed in bank financial institutions in Greece with ratings Caa2 (Moody's credit rating). Foreign Exchange Risk: The Company is neither involved in international trade nor has any long term loans in foreign currency and therefore is not exposed to foreign exchange risk resulting from foreign currency rate fluctuations. Interest rate risk: The Company’s bank loans are in Euro at floating interest rates. The Company does not use derivatives in financial instruments in order to reduce its exposure to interest rate risk fluctuation as at the balance-sheet date. The Company management believes that there is no significant risk resulting from a possible interest rate fluctuation. Source: PPA Copyright (C) PortSEurope. All Rights Reserved. 2019.

Piraeus Port Authority: prospects, expected developments, main risks and uncertainties in 2nd semester

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Piraeus Port Authority: prospects, expected developments, main risks and uncertainties in 2nd semester

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