After a period in which its controlling investment in Wilson Sons (WSON), a seasoned Brazilian maritime services business, was a source of earnings and valuation risk, Ocean Wilsons (LON:OCN) has been benefiting from strength in Brazil’s equity market and currency. There may be setbacks as economic recovery has barely begun, but diversification within WSON, OCN’s global investment portfolio and the 33% discount to a look-through NAV can all be seen as helping to provide some margin for error to investors at this level.
First half results
The first half results continued to be significantly affected by currency moves with the average US dollar/Brazilian real rate down by 20% between H115 and H116. This together with economic weakness contributed to a revenue decline of 20% and a 17% reduction in operating profits. Cost control measures at WSON helped limit the profit reduction. In contrast, since the end of 2015 the real has rallied strongly giving rise to substantial positive accounting items that meant that H1 pre-tax profits increased 43% and earnings per share 66%. Operationally, total volumes in the container ports were boosted by strength in exports, while the business continues to invest for the long term where appropriate.
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