TMM Exits 2010 on Strength - Analyst Blog

Ken Nagy, CFA

TMM Exits 2010 on Strength

Grupo TMM (TMM) is one of the largest integrated logistics and transportation companies in Mexico. The firm, through its subsidiaries provides maritime services, land transportation services, integrated logistics services, and ports and terminals management to international and domestic clients throughout Mexico. As part of its 5-year growth strategy, the firm is committed to modernizing its fleet and increasing its penetration in Mexican Ports, which will in turn maximize margins. TMM’s offshore and product tanker fleet generally work with long and medium-term contracts which has the effect of predictable cash flows.

EBITDA, Free Cash Flow Grows
Grupo exits 2010 having reduced its debt significantly through restructuring and grown its EBITDA for the 5th consecutive year. EBITDA has grown at a lofty 182% or a compounded yearly growth rate (CYGR) of 29.6%. The firm was also Free Cash Flow positive for the year. The firms cash position increased by $58.1 million over the year and short-term debt is only 2.7% or $23.7 million of net debt. It should be noted that the firms Mexican Trust Certificates increased $40.2 million from appreciation of the Peso vs. the Dollar. (these are 20 year term and non-recourse to the company)

5 Year Growth Strategy
Management outlined TMM’s 5-Year growth strategy, which includes increasing penetration in Mexican Ports and adding new vessels to TMM’s Fleet. Regarding increasing penetration in Mexican ports, the firm is targeting Tampico, where it began stevedoring services for general cargo in the fourth quarter, and Tuxpan. Tuxpan is uniquely positioned for a container and liquid terminal for oil products.